USD/CHF Technical Analysis: Beware the Barbed Wire

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Talking Points:

• USD/CHF Technical Strategy: intermediate-term mixed, short-term, very choppy.
• After we saw bulls return in the first half of February, matters have gotten considerably messier for Swissy price action.
• If you’re looking for trading ideas, check out our Trading Guides. They’re free and updated for Q1, 2017. If you’re looking for ideas more short-term in nature, please check out our Speculative Sentiment Index Indicator (SSI).

In our last article, we looked at the return of bullish price action in the first half of February in USD/CHF with eyes on the level of parity for potential re-entries. And while we did see an inflection off of our ‘S1’ zone of support around 1.0040, that level of parity remained untouched in the week since that previous article.

Perhaps more disconcerting for Swissy price action isn’t what has happened as much as what hasn’t; and that’s a seeming lack of respect for prior support or resistance in the pair over the last week, leading to messy price action on the hourly chart that could make directional stances in the near-term a bit of a challenge. This type of choppy price action with little adherence to previously established support and resistance is often called ‘barbed wire,’ and this can be a dangerous prospect, even for range-based, mean-reversion strategies.

Chart prepared by James Stanley

For traders looking to take directional stances on Swissy, waiting for this congestion to resolve would likely be the most attractive manner of proceeding-further. On the chart below, we look at two such ‘barrier levels’ to get a better idea for when a directional stance may be warranted.

Chart prepared by James Stanley

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

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