Besides surprising the market in early December with a larger-than-expected rate cut of 50bps, the Swiss National Bank (SNB) has a tough road to navigate.
The USD/CHF daily chart shows a bullish recovery, marked by higher highs and higher lows, signalling a shift from a bearish trend. Volatility remains moderate, with steady price movement and controlled pullbacks. Indicators like the MACD show bullish momentum across timeframes, supported by a positive ADX reading highlighting buying pressure dominance. Oscillators suggest room for upward movement, as no overbought conditions are present. Key structural points, such as multiple Breaks of Structure (BOS), confirm the bullish bias, while intraday Changes of Character (ChoCH) hint at short-term volatility.
CHF Bullish Thesis The ongoing geopolitical risks, upcoming trade tensions with the Trump administration, and fears of the Euro Zone recession would likely bolster demand for the Swiss Franc as volatility picks up. If there should be a change in sentiment relating to U.S. economic growth or global slowdown, we could expect the CHF to strengthen based on historical global risk-off periods.
CHF Bearish Thesis A combination of the ECB out-cutting the SNB and a potential negative rate in Switzerland would spur on the USD carry trader, putting upward pressure on the USDCHF pair. Additionally, with the SNB front loading, a dovish stance may be pre-emptive as the Federal Reserve adjust expectations of more than 2 rate cuts in 2025. A somewhat hawkish stance by the Federal Reserve may lead to the dollar outperforming the Franc in a prolonged deflationary environment, particularly if moderate growth is reached in the United States.
The 0.9080-0.9100 demand zone provides an optimal entry point for a low-risk, high-reward trade as it aligns with structural support.
Setting the stop-loss below 0.9050 ensures protection against a reversal below the current structure low.
Targets at 0.9150 and 0.9200 align with visible resistance levels, offering logical profit-taking zones while maintaining a favorable risk/reward ratio (~1:3).
A pullback to the 0.9000-0.9050 zone offers a favorable entry aligned with the broader bullish trend.
The stop-loss placed below 0.8900 protects against a deeper bearish breakout while maintaining reasonable downside risk.
Targets at 0.9200 (key resistance) and 0.9400 (long-term range extension) align with significant levels on the daily chart, providing opportunities for a high-risk/reward trade (~1:4).
Bearish Trade Idea for USD/CHF While the broader trend is bullish, visible resistance at 0.9200 and intraday Changes of Character (ChoCH) indicate potential for short-term bearish reversals, especially near overextended levels.
Entry: Look for rejection at the 0.9150-0.9200 resistance zone (previous highs). Confirm entry with bearish price action signals, such as a bearish engulfing candlestick or ChoCH. Stop-Loss: Place above 0.9225, allowing for a false breakout above resistance. Target 1: 0.9100 (key intraday support). Target 2: 0.9050 (deeper retracement level and daily demand zone). Risk/Reward: Approximately 1:2.
Rationale:
Resistance at 0.9200 aligns with prior highs, where selling pressure could emerge.
Bearish signals at this level would indicate short-term profit-taking or a deeper retracement.
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