Bottom line: USDCHF medium term outlook remains bearish until prices stay below the 0.9800 mark. Bears had managed to print lows near to 0.9640 levels before pulling back sharply yesterday. The next leg lower should see USDCHF dropping towards 0.9450/60 levels.

Fundamental Outlook:

USDCHF had rebound yesterday from around 0.9640 and rallied past 0.9700 mark. The US Dollar strength could be short lived and the currency exchange rate may soon come under pressure, as fears of U.S recession looms large.

Over 30 million US citizens have now lost their jobs since COVID-19 pandemic broke out and the figures are increasing week after week. The US GDP forecast for the Second Quarter 2020, has deteriorated further and may print up to -30%. The US Dollar as a safe haven may gain, as the economy faces its worst recession since The Great Depression.

GBPJPY is has slipped lower by 100 pips from recent swing highs at 132.56. The Bank of Japan rate decision is scheduled to be out today at 11:00 PM EST, less than an hour from now. With risk assets witnessing a rally this entire week, the Japanese Yen has come under pressure and GBPJPY has rallied from last week lows around 129.55.

Technical Analysis:

USDCHF had managed to pullback from near 0.9640 levels yesterday and is now seen to be trading around 0.9700/10 levels. The triangle consolidation still continues and we need to see a clear break below the 0.9600 mark to confirm a break. Ideally, prices should stay below 0.9800 resistance is the above triangle consolidation is valid.

USDCHF had earlier rallied from 0.9150 through 0.9900 levels. It seems to be still working on the same boundary and has retraced lower towards the fibonacci 0.50 levels (0.9540) earlier. Since then it has been consolidating within a triangle and needs to drop below 0.9500 mark to complete the corrective structure that had begun since 0.9900 earlier.

USDCHF is expected to resume lower again and print below 0.9450, which is fibonacci 0.618 retracement of the previous rally. A bullish reaction is expected there and USDCHF could be underway towards 0.9900 and higher. Alternately a break lower towards 0.9300 mark would threaten to test below 0.9150.

Traders might be willing to hold on the short positions with protective stops above 0.9800 levels and projected targets below 0.9450 for now.

Prepared by

Harsh Japee, Technical Analyst.

USDCHF Chart

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