CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

USDCHF and DXY diverge

February 23, 2021 3:57 PM

USD/CHF and DXY diverge

The DXY and USD/CHF have been trading together for most of 2021.  The correlation coefficient has been above 0.90 for over a month.  A correlation coefficient of +1.00 means that the 2 assets move together 100% of the time.  Many fx traders who may not have access to the DXY have been using USD/CHF as a proxy.  If one thought DXY was heading higher, he our she would buy USD/CHF instead because the correlation was so high.

However, the correlation coefficient today is only 0.46!  Although it is still positive, it is far from a strong correlation. As a matter of fact, the correlation is at its lowest level of the year to date. 

Source: Tradingview, City Index

USD/CHF broke out of a descending wedge today on a daily timeframe, up over 1%, while the DXY is near unchanged. The first resistance level is the 200 Day Moving Average, which crosses at 0.9150.  Above there is at the 38.2% Fibonacci retracement from the March 23rd highs to the January 6th lows at 0.9200.   Next is a horizontal resistance area between the September 28th highs of 0.9295 and the 50% retracement level of the previously mentioned timeframe near 0.9333.  Horizontal support is back at the breakout level near 0.8990, then horizontal support at 0.8925. 

However, USD/CHF isn’t the only Swiss pair breaking higher today!  EUR/CHF is also breaking higher.  The pair has been moving in an upward sloping triangle pattern and broke out today above 1.0915, moving straight up to near 1.1000!  A resistance zone is above between 1.1059 and the 38.2% Fibonacci retracement level from the April 2018 highs to the Many 2020 lows, near 1.1084.  Support is back at the breakout point near 1.0915.

Source: Tradingview, City Index

It’s also worth noting that GBP/CHF is up 1.45%, AUD/CHF is up 1%, and CHF/JPY is down 0.83% . 

The Swiss Franc has been every weak today, and it appears that there may still be room to run.  However, if one is looking for a proxy to trade the DXY, USD/CHF is probably not the best choice right now.  (As an alternative, EUR/USD has a correlation of -0.96 to DXY.  One can sell EUR/USD as proxy for buying DXY).

Learn more about forex trading opportunities


StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024