Overview:
USD/CHF is trading in higher range. The rate is underpinned by contagion from weak euro; broadly stronger demand for safe-haven USD amid increased risk aversion. But USD/CHF gains tempered by CHF demand on soft EUR/CHF cross. Daily chart is mixed as MACD is bearish, but stochastics is turning bullish; bullish outside-day-range pattern was completed on Monday. But USD/CHF losses tempered by USD demand from Japan importers and life insurers; expectations of aggressive monetary easing from BOJ in coming months to achieve 2% inflation target.
Recommendation:
Buy above 0.943 with upside targets at 0.9495 and 0.9535 in extension.
Resistance levels:
R3 - 0.9495 (Monday's high)
R2 - 0.9535
R2 - 0.9567 (six-month high hit March 14), then 0.9608 (Sept. 5 high), 0.9634 (Aug. 28, 2012 high), and 0.9767 (Aug. 20, 2012 high).
Alternative scenario:
Sell below 0.943 with downside targets at 0.941 and 0.9375.
Support levels:
S1 - 0.94
S2 - 0.937
S3 - 0.9353 (Monday's low)
