The USD/CHF looked like it was about to break out on Wednesday, however, it has stalled today as the dollar continues to do a bit of soul searching. We mentioned yesterday that the dollar was on the cusp of breaking out, and the greenback is one of the top three performers in the G10 this week, so are we set to be disappointed once again?
The truth is we don’t know. The pullback in the greenback today could be some nervousness around the Q1 GDP report, which is expected to be revised lower to -0.5% from 0.1%. Usually GDP revisions don’t have too much of an impact on the FX market, however there is much uncertainty around the US economy right now, so the market is likely to take notice. A weak reading of -0.5% or lower could lead a mini sell off in USD, while a better than expected reading could trigger a continuation of the USD recovery story.
The technical picture remains bullish, even though we have fallen below key resistance at 0.8980 – 90 – the 61.8% retracement of the January – March sell off and the 200-day sma, respectively. The sell-off so far on Thursday has been shallow, suggesting that bearish sentiment could be limited. If we can get back above this resistance zone then 0.9080 – the February high – comes back into view in the short term.
Overall, watch out for GDP.
Figure 1:
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