USD/CHF Technical Analysis: The Gyrating Up-Trend Continues

2016-02-01 17:35:00

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Talking Points:

USD/CHF Technical Strategy: Long, one more target hit, one remains.
Swissy continues to trudge higher in a gyrating up-trend (not the type you want to chase).
With a Daily Doji printing at the moment, traders would likely be best served by waiting for support to come in before triggering fresh long positions.

In our last article, we looked at another top-side entry into USD/CHF should the vaulted parity level come into play as support again. This was an extension of the previous weeks’ efforts. The week ahead of the Christmas holiday we looked at the congestion with a top-side bias, and the week before that we triggered the long-position as a mechanism for getting long USD ahead of the Fed.

Over that month-and-a-half period, USD/CHF has gyrated higher as USD-strength has taken over across markets; but that was somewhat to be expected as the United States is the one economy actually looking at tighter monetary policy. That’s somewhat of the conundrum for where we’re at now: The US Dollar is still extremely strong by most relative metrics, and this may not be the time to push the long-dollar trade. USD is continuing to trade near 13-year highs and with Fed expectations for rate hikes still relatively high, it wouldn’t take much for USD to move lower should Fed commentary allude to slower-than-communicated rate hikes.

Further complicating matters is one of profit potential: USD/CHF is currently sitting very near a six-year high at 1.0327, and with USD already being so stretched, one has to wonder how much legitimate profit potential may be available in the pair. Further, ~130 pips of up-side potential can be difficult to justify with the nearest price action swing ~85 pips away.

But that zone of support that’s developed over the past week could be an attractive re-entry area for future long positions. This would be the zone from 1.0100-1.0125, which was the prior price action swing high and is the current price action swing low (identified on the below chart with a red box). This would afford the opportunity to get a stop below parity, or perhaps even below the .9948 Fibonacci level that’s been relevant for the better part of a year now. This is the 61.8% retracement of the 2010 high to the 2011 low (shown in blue on the below chart).

This would open the door for targets at 1.0329 (current resistance, and prior swing high), followed by 1.0300 (1.618 Fib extension of prior major move), and then 1.0327 (2015 high).