The Swiss Franc has been under pressure since early February with USD/CHF climbing to two-month highs ahead of yesterday’s FOMC interest rate decision. The subsequent reversal has broken below the weekly opening-range lows and we’re looking for a break of near-term uptrend support to suggest that a more significant exhaustion high may be in place.
USD/CHF Daily Price Chart
Technical Outlook: USD/CHF has been trading within the confines of a broad descending pitchfork formation extending off the 2015 & 2017 highs with an embedded channel formation off the December highs (red) continuing to govern price action. The pair turned just ahead of channel resistance this week with the pullback now testing support at the median-line of the broader structure. Note that daily RSI failed to breach above the 60-threshold with a pending support trigger now in view.
A close below the March open at 9445 would be needed to suggest that a more significant high is in place with such a scenario targeting the 2017 lows at 9420 and the monthly opening range low at 9338. A topside breach of this slope would be needed to keep the long-bias in play targeting 9614 and the 100 & 200 DMAs at 9550/61.
USD/CHF 240min Price Chart
Notes: A closer look at Swissie price action shows the pair trading within a near-term ascending pitchfork formation extending off the February lows with price now testing the confluence of the 61.8% line and the February highs at 9470. Look for initial resistance at the weekly open at 9524 with our bearish invalidation level set to the weekly high at 9569. The lower parallel rests with the Monthly open at 9445 and a break below this level is needed to fuel the next leg lower targeting 9424, 9378 and 9333.
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Bottom line: The broader advance off the February low is at risk near-term while below basic channel resistance. From a trading standpoint, I’ll favor selling rallies while below the weekly open with a break below this formation needed to validate the reversal. Look for a resistance hold at 60 in intraday RSI with a break sub-40 to offer further conviction on a shift in the momentum profile.
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USD/CHF IG Client Sentiment
- A summary of IG Client Sentiment shows traders are net-long USDCHF- the ratio stands at +2.33 (69.9% of traders are long) –bearishreading
- Traders have remained net-long since Nov 17th; price has moved 5.0% lower since then
- Long positions are 2.2% lower than yesterday and 16.9% lower from last week
- Short positions are8.9% higher than yesterday and 9.8% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDCHF prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USDCHF price trend may soon reverse higher despite the fact traders remain net-long.
See how shifts in USD/CHF retail positioning are impacting trend- Learn more about sentiment!
Relevant Data Releases
Other Setups in Play
– Written by Michael Boutros, Currency Strategist with DailyFX
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