My pick of the week this week is the USDCHF. I anticipate some upside on this pair throughout this week. Both fundamental analysis and technical analysis paints a picture indicative of upside on this major forex symbol.

Why – Technical Analysis Confluences

First let’s discuss the technical analysis suggesting the pair may have some upside. 

Daily Price Chart Technical Analysis

On the daily price chart price has moved into the 50 moving average as a support. This also correlates with the psychological 0.9200 level, which has been respected numerous times as a key support and resistance level for the USDCHF. This level also correlates with the 38.2% fibonacci level. These are three key confluences acting as support on the daily chart.

4H Price Chart Technical Analysis

On the 4h price chart USDCHF has oscillator indicators indicating potential bullish action. The RSI has created bullish divergence, a bullish indication, as has the PPO. Both indicators are still trading at bearish levels, however the divergence is a promising sign for bulls.

Why – USDCHF Fundamental Analysis

Rising Yields On US Notes

The first reason I fundamentally anticipate USDCHF upside is last weeks 10 Year Note Auction, where the yields were announced at 1.68%, up from the previous 1.523%. This is a positive current reading on the US economy, as attractive investment options across equities and other markets means that yields on the T-note had to be increased to secure purchases. This is typically a very bullish indication for the USD. 

US Stimulus Impacts

With the previous 1.9T USD stimulus released, US economic data has been increasingly positive. The Biden Administration is also hard at work to implement a second stimulus package of 2T USD, that would specifically target the hardest hit sectors of the economy. The stimulus would look to target bridging inequality and repairing infrastructure fractured by the pandemic. The infrastructure plan would aim to improve schools, renovating some of the USA’s landmark figures and spending billions to combat climate change. Biden referred to the stimulus as a “once in a generation investment in America”. The package, if approved, would create thousands of jobs, increase GDP & support those in poorer socio-economic conditions. The idea alone of this stimulus being approved is likely to appreciate USD markets. 

Recent USA Economic Data

Another key reason for USDCHF upside this week is the recent economic data from the USA being positive. Last week alone we saw data for CPI, imports & exports, manufacturing, retail sales, and jobs all exceed expectations with positive figures. The increasingly positive data out of the USA is a very bullish measure for the USD. 

Isn’t This Information Already Priced In?

Whilst some of this information may be priced in, it is difficult for markets to completely price in all of this information. For example, the newly proposed stimulus still has a way to go prior to approval. This results in traders trying to price in whether it will be approved, when a clear approval & implementation will happen, and how long it will take for the economic effects to be felt. This requires a large amount of educated guess work by a large number of different market participants, meaning that every trader will have different estimates on how and when another stimulus may affect the US economy and USD. That is only one example of how pricing in can be difficult – now consider this same process of ‘pricing in’ occurring across all pieces of economic data, the Fed’s policies, and the Biden Government’s policies. ‘Pricing in’ information into the markets is a never ending process, constantly factoring in new pieces of information. Based upon the new economic information from last week, USDCHF upside this week certainly seems plausible.

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Published by Tom Stewart

Head of data analytics at TradeProofer. Analyst at Opes Trading Group. FX enthusiast.

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