USD/CHF Technical Analysis: Swissy Swings into the Sweet Spot of Support

Talking Points:

- USD/CHF Technical Strategy: Longer-term range-bound, intermediate & shorter-term mixed.

- USD/CHF has put in some trending tendencies recently; first with a bullish move up to 1.0095 and then an aggressively bearish move into a very interesting zone of potential support.

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In our last article, we looked at the bearish price action that had engulfed USD/CHF after the pair had found resistance at 1.0095. The bearish move was quick and aggressive, offering very little pause for traders to load-up on the bearish side of the pair. But as we had pointed out, a key zone of potential support sat just below price action, running from .9684 up to .9738. The lower-portion of this zone is the 50% Fibonacci retracement of the 8-year move in USD/CHF, taking the high set in November of 2009 down to the low in August of 2011.

Prices in USD/CHF have been bound between the 50% and 61.8% retracements of this major move since July of last year.

Chart prepared by James Stanley

On the below chart, we scroll-down to the Daily time frame and add another Fibonacci retracement around the ‘election move’ in the pair, taking the November low up to the December high. The 76.4% retracement comes-in at .9738, and this makes up the top-side of the support zone that we’ve been following. And within that zone sits a projected trend-line that can be found by connecting the low in May of 2015 to the low in November of last year.

Chart prepared by James Stanley

This opens the door to bullish swing setups, and this can be utilized with either a short or intermediate-term horizon, based upon how tightly one wants to keep their stop on the setup. For those looking at a longer-term setup with a bit more ‘wiggle room’ on the entry, stops would likely be favored below .9625 while more aggressive stances would likely want to use the upper portion of the support zone, or perhaps even the trend-line projection itself. Those values are at .9738 and (projected) .9725, respectively.

Short-side approaches or those with bearish biases would likely want to wait for a cleaner entry. Prices fell so consistently from the prior high at 1.0095, there is a dearth of nearby areas to use for stop placement. A break below this zone of support could subsequently open the door to down-side continuation strategies but, until that happens, bears should be cautious after a big move ran into a confluent area of support.

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

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