USD/CHF is slightly changed after the 830 am EST GDP release showed that the U.S economy grew at 2.2% in the fourth quarter, a slight miss from the forecast for a 2.4% reading. The initial reaction was a drop from .9641 to .9611, but that was limited because consumer spending had its bets gain since 2007. Early in NY, price has now rebounded towards the .9630 region.
Price action on the USD/CHF four-hour chart shows that recent correction is currently resuming the downward move after initially respecting the .9500 handle. While a pullback against the U.S. dollar was long overdue, we may only see limited downside as expectations remain strong that Federal Reserve will raise rates later this year.
If bearishness remains strong and breaks below the .9500 level, critical support will come from the .9400- .9427 zone. It is around that area that a bullish butterfly pattern could signal a resumption of the bullish dollar trend and a possible rally towards parity. Point D may target the 161.8% Fibonacci expansion level of the X to A leg and 141.4% Fibonacci expansion level of the B to C move. If this pattern is invalidated, key downside could target the .9277 area.
The trade: Buy USD/CHF at .9420 with a stop loss at .9320 and a take profit at .9920. The Risk/Reward Ratio is around 1: 5
Edward J. Moya
WorldWideMarkets Online Trading