USD/CHF to See a Reprieve as Price Rebounds Off Support

• USD/CHF rebounds off confluence support- Further gains likely but broader trend still lower
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USD/CHF Daily Chart

Technical Outlook: USD/CHF is responding to a near-term support confluence at 9553 after plummeting more than 3.2% off the monthly highs. This level is defined by the 78.6% retracement of the September advance and basic parallel support extending off he early December swing lows. Although the broader outlook remains weighted to the downside, the immediate decline is vulnerable while above this threshold with a rebound to ultimately offer more favorable short-entries.

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USD/CHF 240min Chart

Notes: A closer look at near-term price action sees USD/CHF trading within the confines of a descending pitchfork formation extending off the December highs with the lower median-line parallel further highlighting the 9553 support confluence. Interim resistance stands at the slope confluence around ~9640s with a breach above 9675 needed to suggest a more significant near-term low is in place. Broader bearish invalidation stands with the upper parallel at 9728.

A break lower from here targets subsequent support objectives at the 161.8% extension at 9486 backed by the 2017 low-day close / July low 9439. Bottom line: from a trading standpoint, the immediate risk is for this rebound to stretch a bit higher but ultimately the advance should offer more favorable short entries near structural resistance.

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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 +3.78 (79.1% of traders are long) – bearishreading
• Retail has remained net-long since Nov 17th; price has moved 3.9% lower since then
• Long positions are 2.4% higher than yesterday and 24.8% higher from last week
• Short positions are 5.3% higher than yesterday and 22.5% lower 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. Retail is less net-long than yesterday but more net-long from last week. The combination of current positioning and recent changes gives us a further mixed USDCHF trading bias from a sentiment standpoint.

See how shifts in USD/CHF retail positioning are impacting trend- Click here to learn more about sentiment!

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Relevant Data Releases

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- Written by Michael Boutros, Currency Strategist with DailyFX

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