USDCHF: Low Near .8850 Building with .8800 Next Target If Support Fails
The medium term daily candle chart below shows the price history of United States Dollars (USD) against the Swiss Franc (CHF), known as the USDCHF pair, and trading near .8868 around time of publication.
This currency pair appears to be heading towards .8800, where support had been found towards the end of December, and had since rebounded to just above .9150 at the end of January 2014 before failing back towards current levels in recent weeks. Support was found yesterday near .8850, which was also just off the low for today.
Now that the pair is closer to .8800, an imminent test could find support on that line, or test through it - which could be a very bearish signal, if .8850 fails.
Overall, since mid 2013 when the trend changed from a bullish channel into a developing medium term one, USDCHF has been in a gradual downtrend, indicating a weakening US Dollars versus a strengthening Swiss Franc.
If this medium term trend continues, and .8800 doesn't hold (provided that .8850 fails), the pair may be heading lower, whereas if support is found either near current levels or just above .8800 then a return up a bullish trend line could promptly follow with a sharp rebound.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .8916 with a Limit to take profit @ .8949 and a stop-loss @ .8888 Risk/Reward Summary: Limit risk = +33 pips profit / (-28) Stop-loss risk = Gain to Loss ratio = 1.17
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8789 with a Limit to take profit @ .8730 and a stop-loss @ .8828 Risk/Reward Summary: Limit risk = +59 pips profit / (-39) Stop-loss risk = Gain to Loss Ratio = 1.51
Medium term daily candles: