USDCHF Rejected Off 200 EMA; US Dollar Consolidates After Poor GDP

by on May 30, 2014 12:06 pm BST

The USDCHF has rallied quickly after confirming a double-bottom support on May 8, and price action has pushed through medium-term downtrends through .8950. However, after making a two-month high, the US dollar has fallen and began to consolidate after gross domestic product indicated the first contraction for the United States in three years.

Aside from those that live on hopes and dreams, many market participants are beginning to question the real trajectory of the US economy. Economists’ worst case scenario, based upon strong winter weather, has come in higher than expected as the nation contracted one percent versus estimates of negative. 6 percent.

The near-to-medium-term outlook for the dollar is likely to the downside because weaker economic data will give the Federal Reserve more slack to leave interest rate near-zero. The decline of treasury yields are, also, playing a major role in the dollar’s direction. “If interest rates continue to decline, we’re somewhat negative on the dollar in the near term,” said Brian Daingerfield, FX strategist at Royal Bank of Scotland Group PLC.

USDCHF has pushed up to and been rejected of the daily 200 EMA, which corresponds with price action resistance of .8985. The pair could trend lower to .8943 while retesting the broken downtrend. If support is broken, USDCHF will see demand near .8915, a combination of price support at .8900 and the 20 EMA.

If .8985 can be overtaken, look for the pair to trend to .9022.

1D Chart of USDCHF

1D Chart of USDCHF