CAD/CHF Bears Aim to Break Sideways Trend Amid Oil Price Volatility

Market Overview

The Canadian dollar remains under pressure, largely impacted by the volatility in oil prices. While crude oil prices rose by over 1% in Wednesday’s trading, the gains were merely a partial recovery of Tuesday’s significant losses. On Tuesday, both Brent and WTI oil prices dropped nearly $3 following OPEC’s downward revision of its demand forecast for 2024 and 2025. Brent dropped to its lowest level since December 2021, and WTI hit its lowest point since May 2023.

The weakened global economic growth outlook continues to exert downward pressure on energy demand, prompting a shift by investors toward safer assets like the Swiss franc. This risk-aversion sentiment favors the franc, adding to the challenges faced by the CAD.

Technical Analysis

On the daily chart, CAD/CHF has been in a consistent downtrend since July 3, trading below both the 34-period and 100-period moving averages. Sellers continue their efforts to breach the key support level at 0.62197, a critical threshold for confirming further downside. If they manage to break through this level, the path toward the next support levels at 0.61921, 0.61616, and 0.61123 becomes clear.

Despite recent weakness, the decline in bearish momentum over the last few weeks suggests that traders need additional confirmation of a sustained breakout to push the pair lower. A full close below today’s session would likely provide that confirmation, paving the way for further declines. Momentum indicators also support this bearish view. The RSI continues its downward movement in the oversold territory, approaching 70, while the MACD histogram is edging toward crossing below the signal line.

Oscillator Confirmations:

RSI: Currently moving deeper into oversold levels, signaling growing bearish pressure.

MACD: Negative bars are nearing a downward crossover, reinforcing the downside potential.

Moving Averages: Price remains firmly below the 34-period and 100-period moving averages, confirming the prevailing bearish trend.

Alternative Scenario

If sellers fail to maintain momentum and the price reverses, CAD/CHF will face resistance at 0.62414 and the 34-period moving average near 0.62719, which converges with the descending trendline to form a key resistance cluster. Only a sustained break above the previous high of 0.63212 would invalidate the current bearish trend and signal a potential reversal.

Key Levels Overview

• Resistance Levels:
  • Resistance 4: N/A
  • Resistance 3: 0.63212
  • Resistance 2: 0.62719
  • Resistance 1: 0.62414
  • Current Price: 0.62153
• Support Levels:
  • Support 1: 0.61921
  • Support 2: 0.61616
  • Support 3: 0.61123

Key Events to Watch

Investors will closely monitor Wednesday’s U.S. inflation data and crude oil inventory reports. Any sign of declining demand in the oil inventory figures could heighten selling pressure on the Canadian dollar. Thursday’s Canadian building permits report for August will also be critical, offering insight into the health of the Canadian housing market. Meanwhile, the Swiss franc is expected to respond to general market risk sentiment in the absence of significant direct economic events in Switzerland.

Conclusion

The CAD/CHF remains under downward pressure as oil price volatility weighs on the Canadian dollar. With key support at 0.62197 in focus, traders await confirmation of a sustained breakout to drive the pair toward the 0.61921 and 0.61123 levels. However, should buyers regain control, the pair could face a resistance test at 0.62414 and 0.62719. Investors should keep an eye on U.S. inflation data, oil reports, and Canadian housing figures for further market direction.

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