- The Canadian dollar has bounced off a key support line against the Swiss franc, trading just below the 50-day EMA.
- While volatility is expected, traders are watching for a potential SNB intervention and key resistance at 0.58.
The Canadian dollar has bounced a bit during the trading session on Friday as we have tested the previous downtrend line and found support there. At this point, we are sitting just below the 50-day EMA, which, of course, is an indicator that a lot of people pay close attention to. As things stand right now, I suspect it is probably only a matter of time before we start to see a little bit of volatility. The question at this point is going to be whether the Swiss National Bank gets involved.
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Watch the 50 Day EMA
I think ultimately, we have a situation where if we can break above the 50-day EMA, then we could go looking at the 0.58 level. The 0.58 level was a previous support level, so it should be resistance. Keep in mind that the Bank of Canada is fairly loose with monetary policy, and at the same time, the Swiss have been very noisy about the idea of potentially intervening in the currency markets as the Swiss franc may have gotten a little strong for their taste.
Overall, this is a market that I think will continue to see a lot of choppiness, but if we were to break down below the 0.5650 level, it opens up the possibility of dropping back down to the 0.56 level. But again, you have to be very cautious with the Swiss franc, mainly due to the fact that the Swiss National Bank will not hesitate to jump into the markets. If they do, you could find yourself in a lot of trouble very quickly in this market.
Ultimately, I do think this is a pair that's trying to find some type of bottoming pattern, but I'm not a huge fan of the Canadian dollar in general. So, if I am going to go against Swiss franc strength, I'm going to do it with another currency more likely than not. If the Canadian dollar can break above the 0.58 level, though, then we may be on to something.
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