USD CHF Rallies on Potential SNB Action

The USD CHF closed sharply higher on Thursday.  The quick rise to theupside came after early session weakness and formed a closing pricereversal bottom.  This type of reversal pattern is usually indicativeof the start of a major rally.

The USD CHF closed sharply higher on Thursday.  The quick rise to the upside came after early session weakness and formed a closing price reversal bottom.  This type of reversal pattern is usually indicative of the start of a major rally.

Technically, strong buyers came into the market just ahead of a swing bottom at 1.1240.  Fundamentally, there is speculation building that the Swiss National Bank is poised to take aggressive action to devalue the currency as it battles a deflationary threat.  A couple of weeks ago this was only a threat but since then the SNB has been awfully quiet which could indicate they are poised to strike.

Look for a trade through 1.1432 to confirm the reversal bottom and signal the start of a rally to at least 1.1506 to 1.1561. Once the market can regain this zone then it will have room to the upside.