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USD/CHF Technical Analysis: Grinding-Higher, but Resistance Imposing

USD/CHF Technical Analysis: Grinding-Higher, but Resistance Imposing

2016-11-30 19:17:00
James Stanley, Strategist
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Talking Points:

  • USD/CHF Technical Strategy: Swissy holding near 8-month highs, but resistance has been rigid thus far.
  • USD/CHF has been one of the laggards on this USD-move as Franc-strength has held the up-trend back, at least by a bit. This could make short-USD/CHF attractive for USD-weakness scenarios, but USD-strength could likely be more attractive elsewhere, against another currency not CHF-related.
  • If you’re looking for trading ideas, check out our Trading Guides.

For the past few months, we’ve been locked-in on the range in USD/CHF. And after multiple support and resistance inflections, a quick visit down to support on the night of the U.S. Presidential Election led-in to an extended top-side move that finally broke through range resistance.

In our last article, we looked at how the rampant move in USD led to the eventual-break of range resistance in USD/CHF. But even despite this aggressive top-side break of what was previously a rigid zone of resistance, price action in the pair has lagged behind many other major-USD pairings. While Swissy is working on 8 or 9 month highs, other pairs are working on multi-year highs or lows; exhibiting the fact that while the Dollar has been strong, so has the Franc, albeit to a lesser degree.

USD/CHF Technical Analysis: Grinding-Higher, but Resistance Imposing

Chart prepared by James Stanley

This can make long USD/CHF an unattractive way to look to trade USD-strength continuation; at least until something changes, and with the Swiss National Bank and a ‘really’ important ECB meeting coming up in December, you really never know. Should the Euro get slammed with weakness, we may see the SNB attempt to weaken the Franc again; but this is a distant prospect, at least from where we’re at right now.

Back to present tense: Given the fact that USD/CHF has lagged behind many other majors in showing this USD-strength, traders would likely want to relegate such a setup for USD-weakness scenarios, as there are numerous more attractive alternatives to trade with USD-strength, such as USD/JPY or even USD/CAD. So, for traders looking at Swissy right now, they’d likely want to investigate at the bearish side of the pair, but that presents complications as well, as the trader would basically be trying to fade one of the strongest USD-moves on record.

But with that said, the technical formation does exist to substantiate such a play for those looking to take on short-USD exposure. In our last article, we looked at a resistance level at 1.0176, and that’s held up incredibly well thus far. Price action has put in multiple attempts to try to break above but, at least thus far, has been thwarted on each.

The level at 1.0176 is the 50% Fibonacci retracement of the 11-year move in the pair, taking the high from the year 2005 to the low of 2011. Just a bit above at 1.0256 we have the 2016 high, and at 1.0300 we have a confluent level that’s the 61.8% retracement of the 8-year move in the pair, taking the 2008 high to that same 2011 low. This level at 1.0300 is also the 6-year high in the pair, so this could be an ideal area to investigate stop placement for short-side reversal positions.

USD/CHF Technical Analysis: Grinding-Higher, but Resistance Imposing

Chart prepared by James Stanley

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

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