The Dollar Swiss
17 September 2010
The Technical Trader’s view:
MONTHLY CHART
The weakening Dollar is clearly under pressure to go lower.
See how the two attempts to trade back above the 1.1193 Prior Low(s) have come to naught.
The market is ratcheting lower.
Note too that those two attempts have set up a possible bear Continuation Triangle… but it has yet to complete.
WEEKLY CHART
A closer look at that possible continuation Triangle….
We are testing the lower diagonal at 1.0036 (and rising) – but a confirmed close beneath has yet to be achieved.
The target of the Triangle is a good deal lower (about 0.75).
Cautious traders should wait for a break beneath the band of Pivotal support from the Prior Lows at 0.9729-0.9916.
DAILY CHART
The price action at the lower diagonal is typically volatile.
Note well the failed rally at the diagonal /horizontal resistance above the market at 1.0250/ 1.0324.
Short-term retracements to that level should be sold…for a retest of the Triangular breakout levels around 1.00
We think that will happen
The Macro Trader’s view:
The Swiss Franc has enjoyed a strong rally against the Dollar spread over many years with a brief correction around the turn of the millennia. Although a small economy compared to the US, it is well known how strong the Swiss economy is and the standard of living is among the highest in the World.
Currently the Swiss franc has maintained its strength against the Dollar, even as the Euro has faltered. The Euro zone has many problems and the Sovereign debt crisis of earlier this year was really a manifestation of structural problems known to have long existed within the Euro zone but brought to a head by the financial crisis and deep recession.
So while traders are nervous about the health of the US recovery, they also have strong reservations about the health of the Euro zone and that broadly explains the current inertia of Dollar/Euro.
The Swiss Franc suffers from no such headaches. The Swiss economy remains strong and well run and is still regarded as a safe haven for high net worth individuals and a very competitive place to do business, especially for hedge funds, as other leading financial centres, especially London, have recently been placed under the cloud of tighter regulation and the threat of a relatively less friendly environment for financial companies to do business.
Switzerland has benefited from Hedge Funds in particular, looking to relocate out of London to avoid the feared stricter regime which policy makers regard as necessary to avoid another future financial crisis, but which at best smacks of closing the stable door after the horse has bolted and at worst; looking for a scapegoat to cover for regulatory failings and make political hay.
So traders/investors have turned to the Swiss Franc to express their bearish view of the Dollar.
rather than struggle with:
· timing difficulties currently dogging Dollar/Euro,
· intervention fears surrounding Dollar Yen and
· the fickleness of Gold,
In truth the Swiss authorities may also intervene to stem the Franc’s rise, but longer term the trend is clear; the Swiss Franc is a strong currency with a long Bull trend against the Dollar and
in the current environment it looks set to continue even with official interest rates set at the same level: 0.25%.
Mark Sturdy
John Lewis
Seven Days Ahead
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