- The US dollar has been pummeled during the trading session on Thursday as PPI came out weaker than anticipated, one day after seeing a very bad CPI report.
- Because of this, the US dollar is pricing in the idea of the United States falling apart, plus we are starting to get noise over the newswires that perhaps Israel will attack Iran over the weekend, so it makes a certain amount of sense that we would see the Swiss franc act as a safety currency in this environment.
Technical Analysis
That being said, the 0.81 level seems to be offering significant support, so I would watch that level fairly closely. The market holding above that level is of course a very bullish sign, but I also recognize that we have a lot of questions about global security and of course whether or not the Federal Reserve will have to cut rates. If that’s the case, it works against the value of the US dollar typically, and that of course makes complete sense in this environment.
Breaking below the 0.81 level would be horrible for the look of this pair, perhaps sending the pair down to the crucial 0.80 level, which is a large, round, psychologically significant figure and an area that a lot of people will be watching. Anything below that level probably sends this market down to who knows where? But I also recognize that if we were to turn around, we are at an extreme low and could possibly be in the midst of trying to make some type of “double bottom.” Keep in mind that you do get paid a positive swap at the moment and will continue to do so although there are a multitude of different reasons why this market is moving.
I expect a lot of choppy noise, but I do think that sooner or later the buyers come back in. That being said, I don’t have any interest in being the first trader long in this market, so I will wait for some type of momentum to the upside.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
