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It's easy to see that we have been stabilizing over the last couple of days, I think we have a situation where we are trying to find a bottom in this pair, because it has been so viciously sold off. That being said, the market is likely to be looking at this area, and the area extending down to the 0.84 level, as a major“floor in the market.”
All things being equal, this is a market that continues to see a lot of volatility, but it this is a situation where the market is trying to lift itself from the depths of massive selling, as traders are betting on the idea that the Federal Reserve will start cutting rates. In fact, they are getting very aggressive with the idea that the Federal Reserve might cut as much as 100 basis points between now and New Year's Day, but that is a bridge too far from what I can see.
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The technical analysis for the USD/CHF pair is rather dire, but it is worth noting that we formed a very explosive candlestick a couple of days ago from the 0.84 level, as it turned the market around quite drastically. At this point in time, the 0.8550 level is an area that if we can break above there, then I think you have a real shot of the US dollar taking off toward the 50-Day EMA. I also recognize that perhaps the market has gotten far too ahead of itself, and it's possible that we could see the US dollar is far too sold off at this point in time.
In general, this is a situation where we see a lot of volatility, and I don't think that it's going to be the easiest market to hang onto, but I do think that it is probably only a matter of time before we see this market reach quite a bit higher. That being said, the market were to turn around a break down below the 0.84 level on a daily close, that would be an extraordinarily negative turn of events for the greenback, and we would probably see it sell off against almost everything, not just the Swiss franc.
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