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USD/CHF Technical Analysis: Megaphone Leads to Amplified Breakout

USD/CHF Technical Analysis: Megaphone Leads to Amplified Breakout

James Stanley, Senior Strategist

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Talking Points:

  • USD/CHF Technical Strategy: Aggressively bearish break after Friday’s NFP report
  • USD/CHF has seen four aggressive days of selling on the heels of Friday’s NFP report that massively diminished odds of a June rate hike while kicking rate expectations lower for the remainder of the year.
  • SSI - If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator.

In our last article, we looked at the megaphone pattern that had been building in USD/CHF as price action began expanding the previously-defined range pattern. As we wrote, the megaphone pattern is often signaling an upcoming breakout, and after another test of support, that breakout showed up with aggression. Of course this break was driven by an abysmal NFP print that all but extinguished hopes/fears of a Fed rate hike in June; and with markets now expecting the Fed to continue moving towards future rate policy in a dovish manner, the US Dollar has only continued to dwindle lower.

At this point there should be very legitimate caution as to whether Swissy is oversold, as support has been a mere point-of-pause in the aggressive down-trend that’s emanated from the most recent NFP report. The zone from .9660-.9700 could become interesting as a lower-high in the modal of down-trend continuation strategies. The level at .9660 was the February swing-low in the pair and also provided a strong support swing in mid-March and again in mid-May. At .9700, we have the 50% Fibonacci retracement of the May 2015-November 2015 major move in the pair.

Should that lower swing-high develop on USD/CHF, traders can look for a continuation move to support levels at .9550 (38.2% Fibonacci retracement of the same May 2015-November 2015 major move), .9498 (27.2% extension of January 2016-February 2016 move), and then .9441 (61.8% retracement of the 2015 high to the 2011 low).

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

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

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

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