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USD/CHF Technical Analysis: Swissy Pops, but Still in Range

USD/CHF Technical Analysis: Swissy Pops, but Still in Range

2016-10-04 20:57:00
James Stanley, Strategist

Talking Points:

  • USD/CHF has been mired in range-like conditions for the better part of the past seven months.
  • More recently, USD/CHF had built within an even smaller range, which is currently offering resistance after a quick move higher over the past couple of days.
  • If you’re looking for trading ideas, check out our Trading Guides. They’re free and updated for Q4.

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In our last article, we looked at the range within a longer-term range that had developed in USD/CHF. And as we wrote, the shorter-term, smaller range could present complications until a more well-tested level of support or resistance came into play, because the shorter term range had a minimum span of only 140 pips, thereby reducing the potential upside of the setup.

Over the past two days the US Dollar has seen an aggressive bid as hawkish Fed comments have prodded the market higher. This rallied USD/CHF right up to the bottom of the short-term resistance zone that we looked at last week. This could potentially open the door for short positions, but traders would likely want to investigate the risk-reward behind the setup to ensure that they’re comfortable: And perhaps more to the point, the trader would want to be comfortable fading a move that could have significant continuation potential, as the Federal Reserve has displayed a persistent pattern of hawkishness throughout 2016 that may continue to drive the dollar higher until we see some form of FOMC dovishness enter the equation.

For traders looking to play the short-term range by selling near-term resistance, there’s approximately 110 pips down to the top of the short-term support zone at .9682. This would mean a stop of less than 55 pips can offer a 1-to-2 risk-reward ratio, which would mean that traders would be able to wedge stops at or below the .9850 level in the pair. And while this wouldn’t get above the swing-high from August 31st, it could give traders a chance to get a stop above the price action swings from earlier in August.

Perhaps more interesting is the longer-term range; and if this strong Dollar theme on the back of hawkish Fedspeak can continue, this level may come into play in the not-too-distant future. The level at .9949 is extremely interesting, as this is the 61.8% retracement of the 2010 high to the 2011 low in the pair; and more-to-the-point, this set swing-high resistance in both May and July.

USD/CHF Technical Analysis: Swissy Pops, but Still in Range

Chart prepared by James Stanley

--- Written by James Stanley, Analyst for DailyFX

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