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USD/CHF Technical Analysis: Big Picture Fib Resistance Sets the Top

USD/CHF Technical Analysis: Big Picture Fib Resistance Sets the Top

James Stanley, Senior Strategist

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Talking Points:

  • USD/CHF Technical Strategy: Flat.
  • USD/CHF has continued its bullish run, catching near-term resistance at the .9950 level mentioned in our previous article.
  • Should today’s candle finish the day as a Doji, a top-side trend-continuation play m ay be available.

In our last article, we looked at the full-on ascension of USD/CHF as Mario Draghi struck a dovish tone pertaining to European QE, while the Swiss Franc went along for the ride. This statement of potential weakness for the Euro carried a magnanimous tone with the Franc, as the two economies tight trading relationship will often see them priced in-line with each other. As the Euro dropped, the Franc weakened as well, and last week’s hawkish tone from the Federal Reserve only hastened this directional move, as Dollar strength was abundant as traders began to price in a faster-than-expected probability of a rate hike in December.

The symmetrical wedge that we identified previously has finally given way after catching near-term resistance to close the previous week. But surging prices left this trend-line in the dust, and higher-highs and higher-lows have begun to show a bullish bias in USD/CHF, and traders may be able to look for continuation plays with current price action.

For now, the bias in USD/CHF is decidedly to the up-side; and entering long is a matter of preference based on how aggressively one wants to pursue the position. For those that really want to catch the entry, a short-term setup may be available should today’s daily candle close as a doji/spinning top. This could be steps one and two to a potential morning star formation, and entering now could allow the trader a tight stop below .9800 (last Tuesday’s swing-low), with targets set to last week’s swing high at .9950. This is also the 61.8% Fibonacci retracement of the ‘big picture move’ in USD/CHF, taking the 2010 high to the 2011 low. This is Fibonacci retracement that’s seen significant price action in the four years since its formation.

With that in mind, this recent resistance inflection off of such a key level could provide the motive for a ‘bigger picture,’ or longer-term short position. With near-term price action so strong, traders looking for a longer-term short position would probably want to wait to ensure that resistance at .9950 will, in fact, hold. But should this be the case, traders can look to a break below prior resistance of .9780 to ‘activate’ the short stance; at which point potential longer-term targets could become attractive at .9500 (confluent level as a major psychological level, the 61.8 of the secondary move as well as 38.2% of the most recent major move), .9400 (50% retracement of the ‘big picture move,’ and then .9250 (major psychological level, 50% retracement of the secondary move, as well as being the four-month low).

USD/CHF Technical Analysis: Big Picture Fib Resistance Sets the Top

Created with Marketscope/Trading Station II; prepared by James Stanley

--- Written by James Stanley, Analyst for DailyFX.com

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Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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