Previously we have shared several CHF related ideas, which suggest that the Swill Frank might start losing to other major fiat currencies. Along with the AUD/CHF and NZD/CHF, the USD/CHF currency pair might also start moving up.
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:
USD/CHF symbol on the MT4 platform
Type: Bullish
Key support levels: 0.9384, 0.9400
Key resistance levels: 0.9424, 0.9442
Price Action:
On the Hourly chart, we have applied the Fibonacci retracement indicator to the overall downtrend. The 38.2% retracement level at 0.9424 has been acting as the resistance. First, there was a spike produced above this level, but then USD/CHF cleanly rejected it on a small pullback that occurred on July 10. We have applied another Fib to that pullback, and it shows that 227.2% Fibs at 0.9391 was also rejected cleanly, suggesting more upside potential.
When a price has reached the bottom on July 9 and tested the bottom at 0.9361, the RSI oscillator formed a bullish divergence and price went up. USD/CHF broke above the downtrend trendline, which along with the 227.2% Fib rejection suggests that the probability of the trend reversal is currently higher than the downtrend continuation.
The third Fibs were applied to the corrective wave down after breaking the trendline. It shows, that there are multiple Fibonacci retracement levels based on two different Fibs, goes inline with each other. The first resistance confirmed by 127.2% and 50% Fibs is located at 0.9442, which makes it the nearest and potentially the key short term resistance for the USD/CHF. Upon the breakout, pair could be heading towards the 161.8% – 61.8% Fibs (0.9459 – 0.9462) resistance area.
Then, there is 0.9490 resistance, corresponding to 227.2% and 78.6% Fibonacci retracement levels. And final resistance is based at 0.9506 level, confirmed by 261.8% and 88.6% Fibs. It is very common to see 88.6% as the final target if the price is making a correction. This could mean that if USD/CHF will break above 0.9506, it will confirm the trend reversal, where long-term uptrend is likely to start.
Potential Trade Idea:
The key support is seen at 0.9384, which is the low of the most recent downside correction. Therefore, the very attractive buying price could be located between 0.9400 psychological support and 0.9384 low, which will provide the best risk/reward opportunity. While the price might spike below the 0.9384, it could be best to place a hard stop loss below the lowest low at 0.9355. Based on Fibs, there could be multiple upside targets, with the final one being at 0.9505.
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