USDCHF—Grim lower lows

Much is being made of the lows of this pair and it has dipped lower than at any time in at least the last 30 years which is as far as my charts go back. The prior low was .9637 in March '08 and the overnight low was .9555. That's pretty grim. Not so much talked about is that both Euro and Cable have also seen historic lows against the Swiss franc. There has been a steady downward march for years. It's all paper money—fiat money as the extremists keep bleating about—but the Swissy has some backing in gold. So, for that matter, does the Euro so why such historic lows? In any case, nothing goes straight down forever although, unlike Euro, our government apparently doesn't give a hoot about our dollar and there won't be intervention.

The red line on the monthly chart below suggest there could be lower lows to a downward channel line. The blue converging lines, though, suggest other things. It's a declining wedge and while this can be a continuation pattern, prices often break upward since the steepest angle is usually the least sustainable. (There are lots of steep angles around these days—check out Euro's rising wedge or ending diagonal). This could also be an Elliott ending diagonal which would imply a sharp, upward movement. Regardless of which interpretation you give it, there lower boundary hints there won't be much in the way of lows beneath 95 at least in the near term.

If I want to be grim about it, yes, there could be a further break down to 90. No doubt that would provoke the strong and mighty "We support a strong dollar" blah-blah which has continued from the Bush administration (didn't we change parties somewhere? Oh, right, it's still the same old Wall Street crowd running Treasury). But I wouldn't go short at this point thinking that's going to happen. Usually you get a bounce somewhere. And when everyone is saying something is doomed that's often the time markets like to turn.

Bottom line—be careful here. If you want to risk a long, have tight stops below 95. A short also needs tight stops because it could be a bear trap.

Here's the monthly chart:











© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

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