Is the USDCHF running ahead of the dollar index, potentially signaling what’s next for the greenback?
Get the details in today’s USDCHF video, and get an update on the US Dollar Index (DXY).
USDCHF is breaking down on Tuesday, potentially signaling what’s ahead for the US dollar. It comes as the DXY holds above 97.70 at the time of this writing.
However, I have anticipated a sweep of the 97.70 key level since last Wednesday’s low. The volatility from Wednesday’s session triggered a 97.70 retest, but the imbalances at 97.60 and 97.50 remain untested.
While there are no guarantees, a test of 97.50 seems likely. If it happens, the DXY’s price action around 97.70 will offer valuable clues about the dollar’s future direction.
As for USDCHF, the pair suggests continued dollar weakness with a break below the ascending channel support. So far, we have a sustained break of support on the 4-hour chart.
If USDCHF bulls are unable to recover the 0.7980/90 region this week, the pair may target its July low at 0.7872.
The pair has also carved a larger descending channel since May. The USDCHF tested descending channel resistance on July 17th.
Viewing both structures together suggests a potential bear flag. Tuesday’s breakdown could be the confirmation sellers need to force lower rates.
If sellers maintain control, areas like 0.7870 and 0.7720 could come under pressure later this month. The latter could be near the descending channel support.
Alternatively, a sustained break back inside the ascending channel on a 4-hour basis would negate the idea.
