With the bond markets fully expecting the tapering to occur in September, with 10Y benchmarks at the highest level in 2 year, it is somewhat surprising that the FX markets are seeing an almost opposite scenario playing out. The USD has been one of the weakest currencies in the last month but now as we head into an FOMC meeting this Wednesday and further ahead into the likely tapering in September.
What we see therefore is both a technical and fundamental play for the USDCHF pair. Combining this bullish USD fundamentals and then the following technical levels.
As we can see here, the USDCHF is building a rather clean, impressive Inverse Head & shoulders formation. Stochastics lay in the oversold area and are showing signs of moving higher. Below we see a daily chart and can see how there is a strong supporting trendline which will act as our stop level.
Overall we can see that a long at 0.9250, with an initial target at 0.94, and from there 0.96 seems like a sensible trade to potentially get the best of the fundamental shift towards USD.
As always, a protective stop on a close below 0.9175 is recommended.