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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Technical Update - USDCHF bouncing from key support. EURCHF eyeing par
Kim Cramer Larsson
Technical Analyst, Saxo Bank
- USDCHF bounced from key strong support at 0.90 once again and is likely to resume uptrend
- EURCHF breaking resistance at 0.9840 and is now eyeing par
USDCHF has for a third time tested and rebounded from the key support at around 0.90.
The strength indicator RSI bounced from the 40 threshold, meaning it is still showing positive sentiment, suggesting that USDCHF is likely to bounce further.
Despite showing RSI divergence, USDCHF could resume the uptrend.
That scenario is likely to play out if RSI closes back above the 60 threshold and USDCHF closes back above its rising trendline. If those two instances occur, USDCHF is likely to test and quite possibly break above the previous peak at around 0.9225.
Conversely, if USDCHF slides back and closes below 0.90, the cross is likely to be hit by a sell-off down to at least the strong support and 0.382 retracement at 0.8880. Rising 100 and 200 daily moving averages will add to the support at that level.
EURCHF has broken above strong resistance at around 0.9840 and now seems destined to move higher towards the 0.786 retracement of the entire downtrend in 2023 at 0.9917 - see weekly chart.
Daily RSI broke above its upper falling trendline and back above the 60 threshold, supporting the bullish outlook for EURCHF despite also indicating divergence.
However, the 0.9917 level is not a strong resistance, and EURCHF could soon be testing par, i.e. 1.00 – dashed blue line on the weekly chart. Adding to the bullish picture, the 1.382 projection of the April volatile correction is at 0.9957 and the 1.618 projection at 1.0024, close to the strong resistance area 1.005-1.010.
To demolish this bullish trend, a daily close below 0.9760 is required. The first indication of this scenario playing out would be EURCHF breaking below its short-term rising trendline (daily chart).
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