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USD/CHF Technical Analysis: Congesting with a Top-Side Bias

USD/CHF Technical Analysis: Congesting with a Top-Side Bias

2015-12-21 20:13:00
James Stanley, Strategist
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Talking Points:

- USD/CHF Technical Strategy: Long, first target met at .9948.

- Swissy saw significant volatility last week around the Federal Reserve rate hike, and with the Fed sticking to their expectation for four rate hikes next year combined with a dovish Swiss National Bank, we could see these trends continue.

- Traders can look to time moves in Swissy by grading market sentiment, and we’ve just rolled out real-time SSI as part of our new, updated DailyFX 4.0.

In our last article, we looked at a reversal setup in the Swissy ahead of the Federal Reserve meeting in which much of the world was looking for the bank to kick rates higher for the first time in over nine years. And finally, the Federal Reserve did not disappoint; we saw rampant USD-strength ensue on the back of that move, and with the Fed sticking to their expectation for four interest rate hikes in 2016, the ground is set for the possibility of continued USD-strength. And if we combine that with a dovish Swiss National Bank that, for most intents and purposes, is swinging along with Europe; and traders may be able to continue to pick on the long-side of USD/CHF for a strong top-side trend going into 2016.

But for more immediate matters – the Swissy may be setting up for a continuation move, and for traders that are looking for ways to get long US Dollars, this may be one of the more attractive areas to look to voice that theme.

The resistance level at .9948 has brought in sellers for three consecutive days, and in the near-term, this has capped the bounce higher. But continued support at .9902, which was the August high in the pair, could be highlighting a ‘higher-high, higher-low’ relationship in the pair, and this is what could provide impetus for top-side continuation setups. Traders can look to lodge stops below .9842, which was a significant price action anchor point as it set the November low in the pair. For those that want to treat the move more conservatively or aim for larger bigger-picture targets, the level at .9781 is a level of interest, as this is the 76.4% retracement of the secondary move in the pair, taking the 2015 high to the 2015 low.

On the top-side, parity will likely give at least some near-term resistance should this level be hit in the near-term. For those using stops at .9842, a better than 1-to-1 risk-reward ratio is available up to that parity level, so this would be an opportune area for those tighter-stop positions to move stops to break-even or to begin scaling out of the position. After parity, the level of 1.0077 becomes a level of interest, as this is a 27.2% Fib extension from the previous major move that had caught significant resistance when the pair was breaking higher in November. This serves as validation of that extension, and this could come into play again. After 1.0077, the level of 1.0239 becomes interesting as this was the previous 2016 high, and then 1.0300, which is the 61.8% extension of that previous major move as well as being a major psychological level that has also capped the highs in the pair for this year.

USD/CHF Technical Analysis: Congesting with a Top-Side Bias

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

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

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