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Talking Points:
- USD/CHF Technical Strategy: Smaller range broken, longer-term range very much alive; price action approaching resistance of longer-term range.
- The Fibonacci resistance level at .9949 has seen two major tops over the past five months. Another resistance inflection off of this level will open the door for a Triple Top reversal formation.
- If you’re looking for trading ideas, check out our Trading Guides.
In our last article, we looked at the ‘range within a range’ in USD/CHF. But this wasn’t exactly ‘new’ information, as we had looked at similar such scenarios over the prior month as Swissy traded into a tighter and tighter range-bound formation. But with a recent uptick in USD strength as driven by comments from members of the Federal Reserve that indicate that higher rates may be in the cards in the next couple of months, USD/CHF has broken out of the ‘short-term’ range and is heading towards the longer-term level of resistance at .9949.
The level of .9949 is key price level because this has been the high on the pair for now over seven months. This is also the 61.8% retracement of the 2010 high to the 2011 low in the pair; and on two previous occasions, price action has attempted to break through this price only to be rebuffed.
Many traders are familiar with the Double Top formation, looking for highs in a similar zone as a prior price action inflection in order to trade a reversal; but the Triple Top is quite a bit more uncommon. Should price action move higher to find resistance at the .9949 level, this can open the door for reversal setups. Traders can look to wedge stops above the parity level, with targets cast towards prior levels of interest
Chart prepared by James Stanley
--- Written by James Stanley, Analyst for DailyFX.com
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