The bias is bullish while the daily closing price remains above the recent low at 110.85. There are multiple signs that trend is about to turn bullish on short and medium timeframes.
Disclaimer: The analysis presented in this article is for educational purposes only and should not be considered as financial advice.
This analysis was done on MetaTrader 4.
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Trade Idea Details:
Key support levels: 110.86, 111.00
Key resistance levels: 112.14, 114.60
Price Action: The Weekly chart shows a huge range of the CHF/JPY currency pair. There is also a smaller range zone between 111.00 and 114.00 areas. Currently, price is right at the bottom of the smaller range, which could be used for bulls as the buying opportunity. The 200 Simple Moving Average was rejected, yes, price produced the spike below it, although it failed to close lower. We have used the Fibonacci retracement indicator applied to the long-term corrective wave up. It whos that recently, 50% Fibonacci retracement level was rejected, which could result in price moving towards the 23.6% retracement at 114.60.
Next is the Daily chart, where we can see massive support formed between 110.15 and 110.40, This support area was rejected along with the 200 SMA. The most recent price action shows, that the 200 EMA is also being rejected. Such price action shows the bullish potential in the medium to long term for CHF/JPY. Besides, the Fibonacci applied to the corrective wave down after the breakout of the 200 MAs, show that 23.6% Fibs (as per the Weekly chart) corresponds to 361.8% retracement level. It makes 114.60 a very strong resistance level as well as the potential upside targets.
Let’s move on to the 4-hour chart below. The pair is rejecting the uptrend trendline and at the same time, the RSI oscillator formed a bullish divergence. Yet again a sign of a potential price upswing. On this chart, we can see that the nearest strong resistance is seen at 112.14 and it corresponds with 2 Fibonacci retracement levels. On from the Weekly chart and another is 50% retracement of the Fibs applied to the recent corrective wave down.
Finally, the 1-Hour chart comes into play, where price has reached and rejected the bottom of the descending channel. Also, the RSI oscillator formed a bullish divergence, which is another confirmation of a bullish sentiment.
Potential Trade Idea: The buying opportunity is valid as long as the price remains in the 110-85 – 110.20 zone. The exit signal for this idea could be the daily break and close below the recent low at 110.85. Or, considering the potential target of 350pips, stop loss can be placed 150-170 pips away from the entry price. The upside target is seen at 23.6% Fibs which is at 114.60. Perhaps best is to wait until Monday, to avoid any price gaps and then look for pullbacks in order to get the best entry price.