The USDCHF has broken above its multi month channel resistance.  The USDCHF short term count is similar to the EURUSD short term count in that they both may have completed expanded flats as wave 2 or B corrections.  Favor the upside.  I'll look to establish targets as the pattern progresses but 1.1000 is a longer term target. 

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Whether its tight, ill-defined chop or a span of reversals, most of the currency market's liquid pairs are cutting congestion patterns. One of the most attractive of these patterns in my mind is still the broad range between 1.67 and 1.58. The back and forth between two of the most fundamentally despised currencies in the market today is held in place by the UK's extended recession, the BoE's forced hand on loose monetary policy, the safe haven status of the dollar and the general desire to diversify reserves away from the greenback. These fundamental dynamics can and will change; but for the meantime, they are primary concerns and will not be easily shaken. For a position, I will maintain the same setup from last week. A short entry will be placed at 1.6665 with an initial stop of 100 points to cover false breakouts from the past. An initial target of one-and-a-half times risk at 1.6515 is well-within reason of a single day's volatility.

In the meantime, I am also looking took the congestion that has developed with USDCHF. More or less the reflection of EURUSD, this pair goes where the dollar leads it. Yesterday, the dollar was forced lower after the FOMC rate decision, though the event was hardly remarkable from a fundamental standpoint. Nonetheless, a clear dollar support level was breached (1.4865 for EURUSD and 1.0155 for USDCHF) and the technical outcome is a blurred picture for direction. Nonetheless, I believe congestion will prevail even without solid levels to confine price action. This is a relatively risky venture ahead of NFPs and a short-term view. As such I will look for a reduced size long entry near yesterday's lows and place a stop 50-75 points below entry. My first objective will be 100 or more; and I will keep timing in mind as well as the effects NFPs can have before and after its release.

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Looking at underlying fundamentals, the British Pound now stands at a distict disadvantage against the US Dollar with the BOE heading deeper into quantitative easing even as the Fed ends purchases of Tresuries and scales back its expected buying of agency debt and mortgage-backed securities. Put simply, the Fed is slowly reversing its very loose monetary stance while the BOE heading in the opposite direction. This bodes ill for GBPUSD, particularly considering that the pair is now left without support from the equities rally as the correlation to risk trends has quickly dwindled. I will look for  signs of a bearish reversal ahead of 1.67 to establish short.

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Waiting for a pullback from the GBP/USD before taking a long position proved prudent as the pair would fall to the 50-Day SMA at 1.6271 before surging higher. After finding initial support on upbeat comments from the BoE following their rate decision, we have started to see weakness in the pair. The central bank warned of a sharp rise in inflation over the near-term which helped raise interest rate expectations. However, the MPC did add £25 billion to their asset purchase program which will increase the supply of sterling and could weigh on cable over the short-term. We could be seeing the pair settle into a range between 1.6250-1.6700 with the 50-Day SMA serving as a support level. We are also seeing a potential developing wedge which increases the possibility of a breakout. I favor further consolidation at this point and will employ appropriate strategies. Therefore, I will look to go short here with the 50-Day SMA at 1.6270 as my target.

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The GBP/JPY surged to a high of 151.38 during the previous day and triggered the stop at 150.87, the 9/4 low, and the pound-yen may continue to retrace the decline from the end of October as investors maintain long-term expectations for higher interest rates in the U.K. The Bank of England held borrowing costs at the record-low and expanded its asset purchase program to GBP 200B amid expectations for an increase to GBP 225B, and the British pound may appreciate throughout the remainder of the year as policy makers hold a hawkish outlook for inflation. However, as the central bank continues to see a risk for a protracted recovery, instability in the banking sector paired with the downturn in the labor market may continue to drag on the exchange rate as investors weigh the prospects for a sustainable recovery. Nevertheless, as the GBP/JPY fails to mark higher highs and continues to hold the range from the end of the previous month, I will wait to see a directional bias before taking another pound-yen trade.

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Is in the process of consolidating the heavy setbacks seen on 23Oct after failing by formidable internal range resistance in the 1.6700 area. Any recovery rallies are now expected to be well capped in the 1.6500-6600’s, with a lower top sought out ahead of a fresh downside extension through next key support at 1.6240. Using a daily ATR (Average True Range) analysis, we project a potential high by 1.6655 today which we will be happy to sell into. Look for a break below initial support at 1.6400 to accelerate. STRATEGY: SELL @1.6650 FOR AN OPEN OBJECTIVE; STOP 1.6810. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NEW YORK CLOSE (5PM ET) ON THURSDAY.

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