The USDCHF has seen a stall in its upside move after data from the US Census Board showed that consumer confidence index in the US declined from 132.6 to 120.0. The market consensus was for consumer confidence to fall to 115.1. The less than expected drop in consumer confidence is playing out right now on the USDCHF, which has seen a march towards the intraday highs at 0.9685 stalled. The USDCHF has quickly given back any gains made intraday and is now trading at 0.9636.
The drop in consumer confidence is due to worsening business and labour conditions arising from the coronavirus pandemic. Presently, 30 states in the US have announced lockdowns, and last week saw a record jump in the number of people filing for unemployment benefits for the first time.
The report noted, among other things, a relatively strong reading on the Present Situation Index, which showed that the US economy is still strong. Therefore, the Consumer Confidence reading for March may be more reflective of a short term shock.
A look at the 4-hour chart of the USDCHF shows that while the USDCHF gained further traction to add to Monday’s upside move, it is within the context of the consolidation channel that follows last week’s slide. Therefore, the picture is that of a bearish flag pattern, Price action is currently within the horizontal support range which has 0.96274 as the floor, and the low of 19 March/high of 17 March 2020 as the ceiling. Price may trade within this range for a few hours to a day, before deciding on its next move.
The resolution of the bearish flag is for a continuation of the initial leg to the south. Therefore, a break of the support zone allows the USDCHF to breakdown the flag consolidation area, allowing it to aim for 0.95496, with a possibility for a further push towards 0.94963. Attainment of the 0.94324 support line formed by the previous lows of 13 March, completes the measured move from the flag’s breakdown point.
The USD could still strengthen if there is positive data from economic news releases later in the week. This scenario would allow the USDCHF to target the resistance zone that lies between 0.97139 and 0.97393. Further break of this area targets the 0.97793 resistance zone. A renewed push towards parity would have to take out 0.98111 and 0.98652, in that order.