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.

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