Swiss National Bank Promises Decisive Action

The USD CHF posted a daily closing price reversal top onMonday and confirmed the pattern overnight. This type of formation sets up apossible correction back to 1.1184 to 1.1123 over the next 2 to 3 days. Thedirection of the Euro will dictate the movement in the Dollar/Swiss.

The USD CHF posted a daily closing price reversal top onMonday and confirmed the pattern overnight. This type of formation sets up apossible correction back to 1.1184 to 1.1123 over the next 2 to 3 days. Thedirection of the Euro will dictate the movement in the Dollar/Swiss.

The recent divestment out of the Euro has been puttingstrong appreciation pressure on the Swiss Franc. The Swiss National Bank fearsthat continuous selling pressure will hurt price stability and put the Swisseconomy at risk. The main concern is damage to the export market will stall theeconomy. SNB President promised to act in a decisive manner which could meananother round of intervention should the Euro weaken substantially.

The GBP USD is holding inside of yesterday’s range. Thetight overnight range indicates impending volatility. Earlier this morning, itwas reported that U.K.inflation surged 3.7%. This report has had very little influence on the Sterling.

Bearish talk has been circulating that the previousgovernment pushed through spending measures which will make the newgovernment’s attempts to cut the U.K. deficit and balance the budgetmore difficult. Pressure is likely to remain on the British Pound as the newgovernment is likely to propose severe budget cuts and tax increases whichcould put a strain on the economy. Investors are also concerned that theweakening economy may encourage the Bank of England to renew its bond buyingprogram which would have a negative influence on the economy.

Like the Euro and Swiss Franc, the British Pound chartpattern suggests oversold conditions which could mean the start of a 2 to 3 dayshort-covering rally. Unless there is fresh news regarding the economy, tradersshould be careful about shorting the Pound at current levels.

Oversold conditions and the lack of fresh bearish news arehelping to support the EUR USD overnight. Fundamentally, nothing has happenedovernight to change the minds of traders. Investors are still concerned thatthe European Union is not doing enough to fix the financial problems in theEuro Zone. The lack of confidence in the European Union continues to remain themajor reason behind the selling. Investors want clarity not just ideas from theEU. This would include the implementation of new austerity measures by the fivecountries at the center of the financial problems: Portugal,Italy, Ireland, Greeceand Spain.

Technically, the Euro confirmed the daily closing pricereversal bottom at 1.2233. This should trigger the start of a 2 to 3 day rallyor a move back to 1.2787 to 1.2918. A rally into this zone will not be a changein trend, but is likely to attract fresh selling pressure.

A late session turnaround in the U.S. equity markets on Monday andthe follow-through rally overnight is helping to underpin the USD JPY. Ifsentiment shifts toward risky assets then look for selling pressure to buildagainst the Japanese Yen.

The USD CAD rallied Monday morning but ran into resistanceat a 50% price level at 1.0424. The minor reversal to the downside indicatesthat a 2 to 3 day break is likely. The first objective at 1.0273 was reachedovernight. Downside momentum could trigger a further break to 1.0235. A changein investor sentiment should help the Canadian Dollar. Traders should watchcrude oil and equity prices for direction. Greater demand for risky assetsmeans greater demand for the Canadian Dollar.

Greater Demand for higher risk assets is helping to limitlosses in the Australian Dollar. The NZD USD is trading better. The chartformation suggests that a retracement back to .7120 is possible over thenear-term if U.S.equity markets can sustain a strong rally.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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