Over the past several sessions, USD/CHF was testing the 100-day simple moving average (SMA) and broken trendline support. The pair dropped sharply today after a disappointing Aug. employment report fueled speculation of more easing from the Federal Reserve. Several technical developments also indicate the potential for further downside in USD/CHF. These developments include:
- Broken trendline support has acted as daily resistance on recent tests
- The 100-day SMA currently converges with the trendline pivot and is around 0.9570
- The pair has trended lower (lower highs, lower lows) since peaking in July
- Daily RSI is below a horizontal pivot, indicating continued weakness
- USD/CHF looks to be in wave 3 of a bearish impulse wave…
- …and in wave v of the impulse within wave 3
Elliot Wave analysis suggest a potential correction higher to form wave 4 before completing the 5 wave pattern. Therefore, we would prefer to sell USD/CHF on strength as long as the pair remains within the bearish trend channel. Key resistance is the top of the channel and 55-day SMA (currently around 0.9625)and depending on the timing it looks as though this may soon converge with the 100-day SMA and trendline pivot. While the pair remains below this level, our bias is to the downside and a sustained break above the 55-day SMA would negate our view and is likely to see the potential for a move higher.
