USD/CHF Poses Topside Break Above Confluent Resistance

Talking Points:

– USD/CHF strength has shown-up in the second half of Q1 after a very tough first half of the quarter. Prices are now trading over a key point of confluent resistance.

– While that move of strength remains, USD/CHF still carries hints of being overbought as RSI divergence remains on shorter-term charts.

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USD/CHF Continues to Gain After February Lows

USD/CHF spent most of the first half of Q1 in the process of selling-off, eventually setting a fresh two-year low in mid-February as bears very much remained in-control. But after that fresh low was set on February 16th, strength began to show as the pair tilted higher and, at this point almost two months later – that strength has not yet stopped. Prices have set a fresh two month high this morning as USD/CHF rallied up to the .9600 level. This bullish run now includes a break above a bearish trend-line that had showed-up off of the highs in December/January price action.

USD/CHF Daily Chart: February Pains Lead to March Gains

Chart prepared by James Stanley

At this stage, we’re in the process of breaking above the 50% retracement of that recent major move, taking the December high down to the February low. This level comes in at .9583, and this price had helped to set last week’s high, which was confluent with the bearish trend-line looked at above. With a bullish break above this area, the door begins to open for a continuation of bullish price action.

USD/CHF Eight-Hour Chart: Testing Above Last Week’s Highs at Confluent Resistance

Chart prepared by James Stanley

At this stage, the primary complication with trading the topside of USD/CHF would be one of positioning. As we’ve approached resistance in the past, even as we break through today, that bullish response appears to weaken as we get near prior highs. While this does not preclude the possibility of continuation, it does highlight that this bullish move is quite stretched at the moment, and if we look at relative strength on the two-hour chart, we can see where RSI divergence showed-up after yesterday’s move to fresh highs.

USD/CHF Two-Hour Chart: Diverging RSI Shows Move Remains Overbought

Chart prepared by James Stanley

On the above chart, we used a red box to point out an inflection around the .9550 level, as this is the current day low which happened to show a quick element of support off of that bearish trend-line projection. This could be a key point on the chart for bulls, as a higher low above this level keeps the door open for top-side strategies. This would allow for stops to go either below the prior batch of support around .9520, or below the psychological level of .9500.

This same point can also be used on the bearish side of the market, as failure to hold this support would break the chain of recent higher-highs and lows, and a further downside break back-below .9500 opens the door for short-side strategies.

USD/CHF Four-Hour Chart: Key Point of Inflection ~.9550

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on FX pairs? Our DailyFX Forecasts for Q1 have a section for the more popular major currencies. We also offer a plethora of resources on our USD/CHF page, and traders can stay up with near-term positioning via our IG Client Sentiment Indicator.

— Written by James Stanley, Strategist for DailyFX.com

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