USDCHF: Momentum Builds as US Dollar falls to lowest levels against Swiss Franc Since February.
The chart below shows the daily price history of United States Dollars (USD) against the Swiss Franc (CHF) over the medium term. This currency pair is known as the USDCHF and is currently trading near .9056 (as of publication). Following last week when we covered the pair in a previous article, the failure of the long term bullish support line (point 7 on chart in green) was blamed for the bearish continuation after Ben Bernanke’s FOMC announcement. Also noted, was the potential for the USDCHF to continue its descent along the short term bearish resistance line (point 1 in red) after having found support upon it following last week’s sell-off.
The low for today’s session of .9019 coincides near the lowest price since February 1st 2013, which could act as static (horizontal) support, as well as the lower line of a bearish channel (point 9 in white) which could also act as support. If support is found (near today’s lows) a bullish reversal could follow up a steep line (such as point 2 in aqua) with a target of the long term bullish support line (point 7 in dark green).
If the current short term bearish support line fails (point 1 – which was previously resistance), along with the support line of the medium term bullish channel (point 9), the USDCHF pair may re-enter the bearish channel formation (point 1). If the bearish channel is reentered, a target of the median line of that channel (point 6 in yellow) via a steep bearish line (such as point 5) consistent with the slope of previous such momentum – may follow.
With regards to the short term, contrarian traders may be building long (buying) positions expecting a bullish reversal, whereas trend-followers may be building short (selling) positions expecting the bearish momentum to continue.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .9111 with a Limit to take profit @ .9173 and a stop-loss @ .9072 Risk/Reward Summary: Limit risk = +62 pips profit / (-39) Stop-loss risk = Gain to Loss ratio = 1.58
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .9016 with a Limit to take profit @ .8951 and a stop-loss @ .9050 Risk/Reward Summary: Limit risk = +65 pips profit / (-34) Stop-loss risk = Gain to Loss Ratio = 1.91
Medium term daily candles: