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USD/CHF: retail remains heavily long but outlook is cloudy

The recent USD/CHF rally has stalled in recent days and technical support is now being tested.

Swiss Franc (USD/CHF) sentiment, price and analysis:

  • Clients remain heavily long USD/CHF but outlook is muddled
  • USD/CHF battling short-term technical support

IG retail trader data shows 76.05% of traders are net long with the ratio of traders long to short at 3.17 to 1. The number of traders net long is 0.78% lower than yesterday and 7.84% lower from last week, while the number of traders net short is 15.61% lower than yesterday and 12.36% higher from last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net long suggests USD/CHF prices may continue to fall.

Positioning in USD/CHF is more net long than yesterday but less net long from last week. This mixed combination of current sentiment and recent changes gives us a further mixed USD/CHF trading bias.

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Away from client sentiment, a few macro factors are in play. The Swiss Franc remains a firm risk-off currency and is the go to in times of volatility, along with the Japanese Yen. With the run in to the US Presidential Election in early November expected to see raised levels of volatility, the Swiss Franc should remain popular. The Swiss National Bank (SNB) however is known to intervene to prevent the Swiss Franc from rallying too far, in order to protect the countries’ export sector. The recent strong bounce off USD/CHF Fr0.9000/Fr0.9050 may well have been aggressive SNB intervention and an effective short-term floor for the pair.

The daily chart shows the pair currently bouncing off the 20-day simple moving average (SMA), the red line, at Fr0.9165 and this needs to hold if USD/CHF is to push higher. Below here, the 50-day sma at Fr0.9126 comes into play. To the upside the recent double-top at just under Fr0.9300 should temper further upside.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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