USD/CHF Technical Analysis: Lower-High Caution for Longs

2016-08-10 17:36:00 James Stanley

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Talking Points:

USD/CHF Technical Strategy: Tracking USD-trends, near-term price action is messy, longer-term clinging to bullish posture.
USD weakness has built-in a series of short-term lower-highs in Swissy, and traders looking to get long will likely want to wait for support to show before triggering.
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In our last article, we looked at the brutal reversal of the prior up-trend in USD/CHF as a significant bout of weakness in the Greenback drove the pair lower. But as we also mentioned – given that longer-term bullish posture in the Dollar and perhaps more importantly, USD/CHF, should price action develop a higher-low north of the prior swing-low, the door could be opened for top-side plays. This happened last week…

The US Dollar put in a vigorous reversal around the release of Non-Farm Payrolls in the United States, and this strength carried USD/CHF higher into a prior batch of support. This prior chunk of support is just shy of a key Fibonacci level at .9847; which is the 38.2% retracement of the May 2015 low to the November 2015 high. Since running into that resistance, the Swissy has continued to face pressure and this highlights a ‘lower-high’ in USD/CHF that should, at the very least, moderate traders’ bullishness towards the setup.

But longer-term, we still have ‘higher-lows’ showing. The swing low in May bounced off of a key Fibonacci level at .9441, and the swing-low in June bounced off another Fibonacci level a bit higher on the chart at .9550. These longer-term ‘higher-lows’ denote the potential for USD/CHF to remain an attractive candidate for long-USD exposure.

So because of this longer-term bullish bias coupled with this near-term bout of weakness after a resistance inflection, traders could look for price action to move down to support before triggering bullish setups with the aim of taking the Dollar higher. A level of interest for such an approach is showing at the .9700 handle, as this is the 50% Fibonacci retracement of the same major move we’d looked at earlier. And should price break below the .9700-handle, traders can look a bit deeper to the most recent swing low around .9632 for that support. If price action breaks below the .9500-handle, bullish stances should be moderated as evidence of longer-term strength in the pair would be far less prominent.