USD/CHF bearish below 1.0120, sellers targeting 100-DMA

Currently, USD/CHF is trading at 1.0020, marginally up +0.05% on the day, having posted a daily high at 1.0047 and low at 1.0009.

Another US pair is not digesting the latest CPI readings with a positive expected impact on long-dollar positions. The USD/CHF pair trades 160-pips from this week's high; why is this relevant? Concerning price behavior, the Swiss franc erases at this point more than 322-pips in previous losses vs. the American dollar. Not only that, this ongoing dollar weakness, indicates further gains for the franc if it breaks the next critical support at 0.9950 level.

Draghi against the almighty dollar

Valeria Bednarik, Chief Analyst at FXStreet, notes that growth in the EU seems to have picked up by the end of 2016, with PMIs having steadily advanced in the last quarter of the year and economic sentiment improving. The major problem the region faces now, is political turmoil, which will likely persists all through this 2017.

She further writes, "In general, market believes the ECB is at the beginning of the end of its massive bond-purchase program, even despite Draghi said last December, “ . . . as a matter of fact, it’s not even been on the table.” Investors, however, refuse to believe his words, moreover after the minutes showed dissention among policy makers."  

"With all of the above, the Central Bank will likely leave its monetary policy unchanged, while Draghi is expected to offer a hawkish, confident speech. Given that the market is happily unwinding its dollar's longs, the common currency will likely extend its weekly advance following the statement and press conference."

USD/CHF Levels to consider

To the upside, USDCHF peaked at 1.0334 at the beginning of January as the Trump Trade started losing value. Then, critical barriers for dollar bulls are aligned at 1.0121 (50-DMA), and above that at 1.0246 (Jan. 11 high). To the downside, the next logical support to target for sellers is near 0.9950 (100-DMA), and below that at 0.9845 (200-DMA).

On the long-term view, there is evidence to expect further gains for the Swiss franc as the trading environment seems confused on two fronts: Fed's hiking cycle in 2017 and Trump's Agenda. If technical current technical conditions persist, then 0.9947 (short-term 50.0% Fib) is next, then 0.9853 (short-term 38.2% Fib) is doable, and finally, 0.9736 (short-term 23.6% Fib) may be the end of the road for this corrective move for the dollar. To note, if prices close and open below 0.9628 (long-term 61.8% Fib), then the long-dollar narrative must be adjusted.

A Coming Change Of Direction For The Dollar?