By Russell Glaser
Rising geopolitical tensions across the globe have directed safe haven flows into the Swiss franc.
The past two weeks have brought increased risk aversion to the financial markets due political unrest in the Middle East which has turned into violent clashes and all out civil war in Libya. Continued protests in Bahrain and Iran threaten stability while at the same time two Iranian naval vessels have passed through the Suez Canal, provoking regional tensions.
These events have had not only a psychological impact on the improving global economy, but have caused market players to act accordingly. Oil prices have been sent higher and equities have slumped, as have higher yielding currencies such as the Australian dollar
In a search for safe haven assets, traders have moved out of riskier, higher yielding securities. One of the main beneficiaries of these inflows has been the Swiss franc. Since February 11th, the franc has booked significant gains versus both the dollar and the euro. The turnaround in both the USD/CHF and the EUR/CHF has come at significant technical levels.
The downward movement of the USD/CHF began as the pair made a double top reversal pattern at a price of 0.9770, a price level that coincides with a 61.8% Fibonacci retracement of the December move lower. The pair is now encroaching on significant support levels. The early February low of 0.9330 and the December 31st low of 0.9300 stand out.
Looking at the EUR/CHF, the downtrend resumed as the pair failed to move above the 200-day moving average at 1.3200. Since this failure, the pair has since retraced 50% of the January to February move at 1.2800. Support in the downtrend is found at the early January high of 1.2720 with further support at the swing low on the daily chart at 1.2400.
Should the geopolitical events continue to unrest financial markets, the Swiss franc will be a significant benefactor in the search for safe haven bids.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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