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USD/CHF: Swiss Franc Pulls Back From Fresh Two Year Highs Against USD

USD/CHF: Swiss Franc Pulls Back From Fresh Two Year Highs Against USD

James Stanley, Senior Strategist

Talking Points:

- USD/CHF has been one of the cleaner trends of US Dollar weakness, and that move continued this week as USD/CHF sank to fresh two-year lows.

- The bearish move in USD/CHF is stretched, and so far on the day we’re seeing a bit of near-term resistance develop at that prior two-year low around .9257. Traders should be very careful of looking at short-side continuation strategy on a Friday ahead of an extended holiday weekend out of the United States. We look at a couple of deeper resistance levels below that could be usable for next week.

- 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.

To receive James Stanley’s Analysis directly via email, please sign up here

USD/CHF to Fresh Two-Year Lows

The US Dollar has been in a strong trend of weakness for well-over a year now, and that trend got another push-lower this week around the release of US Inflation numbers for the month of January. As we’ve been discussing, while USD-weakness has shown quite visibly in most major currency pairs, few have offered the level of consistency that’s been visible in USD/CHF.

USD/CHF ran into a key area of support in early-February when traders showed up to lift prices off of the prior two-year low. This low was set at .9257, and price action last traded here on the morning of August 24th, 2015; aka, China’s ‘Black Monday’. But when prices made an attempt to take out those lows earlier in the month, bears were rebuffed after bulls came-in at support to push prices higher. This bullish push saw USD/CHF trade as high as .9470, and that’s when the sellers began to come-back into the pair. Collectively, this bullish push had produced an up-ward sloping channel, which when combined with the prior bearish trend, gives us a bear flag formation that began to break earlier this week.

USD/CHF Hourly Chart: Fresh Two-Year Lows After Bearish Break of Bear Flag

usdchf hourly chart

Chart prepared by James Stanley

Prior Two-Year Lows Now Showing as Short-Term Resistance

As you can see from the above chart, that prior area of support around the previous two-year lows of .9257 are helping to set near-term resistance. This may not hold for long, so for those looking at bearish continuation strategies, a deeper retracement would make the prospect of continuation look a bit more attractive, while also affording the opportunity to work with a better risk-reward ratio. On the below chart, we’re looking at two levels of interest taken from prior price action, each of which could open the door for bearish continuation should short-term resistance begin to show. If prices are unable to maintain below this week’s high of .9402, the near-term short stance should take a back seat to wait for a better level or method of entry.

USD/CHF Hourly Chart: Bearish Continuation Possibility With Lower-Lows, Highs

usdchf hourly 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.

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

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Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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