CADCHF Potential Reversal Zone – Probable Price Path
CAD: The CAD is softer against the USD, reflecting the broader trend toward a USD rebound that we think is taking hold in the markets. There is little domestic news driving the CAD but softer crude oil prices and risk aversion is weighing somewhat on the CAD tone, even as G10 FX correlations with equity markets remain relatively soft. The prime focus for the CAD this week will be the BoC policy meeting today; no change in key policy settings are expected but markets will be on guard for any sign that the BoC is following in the Fed’s footsteps and shifting is policy-making framework
CHF: With Switzerland recording a seventh straight month of annual consumer price deflation in August – and for almost half the 120 months of the past 10 years – it claims it can’t afford to let the franc rise much higher on a sustained basis. Even though the pressure has reduced on the franc against a recovering euro of late, it will likely remain a seller of the currency – and a growing technology stockholder by default – at least until a vaccine arrives to finally end the pandemic’s exaggerated investment drive to both safety and the new economy. SNB officials, such as Vice Chairman Fritz Zurbruegg stressing they will continue to resist franc strength to meet “price stability” of between zero and 2% – unlikely any time soon, given the latest inflation report.
From a technical and trading perspective,the CADCHF has been grinding higher in an ascending trend channel. It is noteworthy that cycle and momentum studies have started to roll over suggesting a divergence. Yesterday printed an key outside reversal pattern which closed right on the ascending trend channel support, this morning prices have opened below the trend line support, as such, bearish exposure should be rewarded on a breach of the overnight lows. Bearish targets below are sighted at the monthly pivot and projected monthly range support .6875/90, though this area opens a move to test primary trendline support at .6800. On the day only a close back through .7000 would negate the downside thesis.
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