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Talking Points:

- USD/CHF has continued to trade-higher after the aggressive down-trend in the pair started to reverse in mid-February. But with prices now running into a key Fibonacci level around the psychological .9500, do bulls have the ammunition to break-out to further highs?

- The longer-term trend remains down in USD/CHF, and the bullish theme that started in mid-February started just after fresh two-year lows in the pair. We look at how traders can use short-term price action to look for a return of the longer-term, bigger-picture theme of weakness in the pair.

- 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 Grasps on to .9500

The US Dollar continues to battle around the 90.00 level on DXY; and given the expanding range that’s shown in the Greenback’s price action since February, we may be on the cusp of a large move in the US Dollar. But, despite this direction-less near-term nature, USD/CHF has continued to creep-higher on charts as Swiss Franc-strength takes a back seat.

As we came into February, CHF-strength was quite prominent, and this had helped USD/CHF to exhibit one of the cleaner down-side USD scenarios across major pairs. But, as we looked at two weeks ago, those prior semblances of weakness in the pair began to recede as price action in USD/CHF started to show bullish tonalities. That theme has largely continued as USD/CHF has put in a couple of tests of the psychological level at .9500, with some short-term support showing after a pullback earlier this morning.

USD/CHF Four-Hour Chart: Franc-Strength Recedes, Higher-Highs, Higher-Lows

usd/chf four hour chart

Chart prepared by James Stanley

The big question, of course, is one of sustainability: Can one of the more pronounced scenarios of USD-weakness all-of-the-sudden turn into the polar opposite, as one of the pairs showing a rather clear situations of US Dollar strength?

Scrolling out to longer-term charts suggests that this bullish move is still corrective in nature, particularly when taking into account the longer-term context around USD/CHF. That streak of strength began to develop just after the pair had punched down to fresh two-year lows; and this was the same day that the US Dollar (via ‘DXY’) had set its own three-year low (February 16th). At this point, we’re seeing a bit of resistance around the 38.2% retracement of that bearish move; and that resistance began on Friday and has thus far continued into the new week.

USD/CHF Daily Chart: Short-Term Strength Runs into Resistance

usdchf daily chart

Chart prepared by James Stanley

Moving Forward

For those harboring a bullish view of the pair, a break above the near-term high could make that scenario of topside continuation look more attractive, and this could also open up the possibility of using the .9500-.9513 zone that’s currently helping to shape resistance as higher-low support.

Alternatively, a bearish break below the prior swing-low/previous swing-high of .9480 could open the door for short-side strategies, as we’d then have a near-term lower-low pointing to the greater possibility of reversal of this recent theme of strength. For those looking to be a bit more conservative with trying to catch the bearish reversal, awaiting a break of the bullish trend-line off of the February/March lows could also open the door to short-side strategies in the pair. While that trend-line is near the .9480 level, the two don’t intersect into confluence until tomorrow evening.

USD/CHF Hourly Chart: Bullish Trend-Line Remains as Price Action Tests Around .9500

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