Talking Points:

- USD/CHF recovered after a test of two-year lows in early-February.

- Price action built into a bullish channel after those lows, creating a bear flag formation.

- Are you looking to improve your trading approach? Check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

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USD/CHF Bounce From Two-Year Low Continues Through First Half of Last Week

Last week finally saw some element of respite in the bigger-picture bearish theme around the US Dollar. As the Greenback fell down to fresh three year-lows two weeks ago, USD/CHF ran into its own two-year low at .9257. In what was one of the cleaner USD-trends as we opened last week, a retracement developed after bears were unable to take-out .9257. This was the low that was set around China’s Black Monday in August of 2015, when a bout of risk aversion swept the world.

USD/CHF Weekly Chart: August, 2015 Low Holding Current Support

usdchf weekly chart

Chart prepared by James Stanley

A Bear Flag Builds on Shorter-Term USD/CHF Charts

Prices in USD/CHF ran-higher after Non-Farm Payrolls, and that strength continued through the first half of last week. But while that move was coming-in, a bullish channel had formed at the bottom of a bearish trend, giving us a bear flag formation to work with on shorter-term USD/CHF charts.

USD/CHF Hourly Chart: Bear Flag Forms After Bears Thwarted at Two-Year Lows

usdchf hourly chart

Chart prepared by James Stanley

Bearish Continuation Potential

On Thursday of last week, a quick bout of Dollar-weakness showed-up around the Bank of England’s Super Thursday. This created quick dips in EUR/USD and GBP/USD which, by and large, have continued as each of those bullish trends have seen deeper retracements. But one area that USD-strength did not continue showing was USD/CHF, as the pair broke-below that bullish channel, after which resistance started to show in the zone that we were looking at last week. This runs from the approximate .9386-.9409; taken from a group of prior swing-highs from January price action.

Near-term support appears to be coming-in from the 23.6% Fibonacci retracement of the May, 2015-December, 2016 major move; and for those looking at taking a more conservative stance towards bearish continuation in the pair, awaiting a down-side break of this level could make continuation prospects look a bit more attractive.

But for those looking for short-side USD plays, the setup in USD/CHF will likely remain as attractive in the near-term, and for those looking to implement the setup with current levels, stops can be investigated above last week’s swing-high of .9370, with targets cast towards .9300 and then.9250 on the way to fresh two-year lows in the pair.

USD/CHF Four-Hour Chart, Resistance Applied

usdchf four-hour chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on FX pairs? Our DailyFX Forecasts for Q1 have a section for the more popular major currencies. We also offer a plethora of resources on our USD/CHF page, and traders can stay up with near-term positioning via our IG Client Sentiment Indicator.

Chart prepared by James Stanley

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

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