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USD/CHF Technical Analysis: Fib Sets Up The USD Fade

USD/CHF Technical Analysis: Fib Sets Up The USD Fade

James Stanley, Senior Strategist

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Talking Points:

  • USD/CHF Technical Strategy: Previous long setup stopped out, new short setup identified.
  • Swissy fell through some significant support levels after last week’s bout of USD weakness.
  • USD is seeing major volatility around continued vacillation around rate hike expectations, and this could continue for a while. Make sure your risk management has been addressed.

In our last article, we looked at a long re-entry into USD/CHF after a previously strong top-side run. The premise for that setup was the fact that Janet Yellen was going into Congress to give the twice-annual monetary report, and with USD being at support, there could’ve been an attractive risk-reward to the upside. That didn’t come to pass as USD sold off aggressively even ahead of Ms. Yellen’s testimony, and as she began her two-day trip on Capitol Hill, the dollar only drove lower and lower.

But on Wednesday, Thursday and Friday, USD and USD/CHF worked on a three-candle bottoming formation with fresh support coming in just above .9650. The first three days of this week have, so far, furthered the move with price action now moving closer to the .9948 Fibonacci level. This is the 61.8% retracement of the ‘big picture’ major move in USD/CHF, taking the 2008 high to the 2011 low. This level has also provided numerous instances of support/resistance in the recent past, so it becomes a very interesting level when looking for swings.

The near-term setup is to look for resistance at this .9948 Fibonacci level. Should price action show resistance here, as indicated by a top-side wick on the hourly or 4-hour chart, traders can look to get short with a stop wedged above parity. This opens the door for targets at .9842 (prior price action swing low), .9749 (76.4% retracement of the prior major move, taking the August 2015 high/low). After .9749, the level of .9660 becomes interesting, as this is just above the 76.4% retracement of the previous major move, as well as being near-term support in USD/CHF.

USD/CHF Technical Analysis: Fib Sets Up The USD Fade

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

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

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