USD/CHF Price Analysis: Bearish continuation pattern, rectangle spotted on hourly charts
|- A strong pickup in the USD demand assisted USD/CHF to regain traction on Monday.
- The risk-off mood underpinned the safe-haven CHF and capped gains for the major.
- The formation of a rectangle on hourly charts supports prospects for further losses.
The USD/CHF pair retreated around 15-20 pips from the daily tops and was last seen trading with modest intraday gains, around mid-0.9100s.
Worries about the spread of the highly contagious Delta variant of the coronavirus weighed on investors' sentiment. This was evident from the prevalent risk-off mood, which underpinned the safe-haven Swiss franc and capped the upside for the USD/CHF pair.
That said, expectations that the Fed could be moving closer to tighten its monetary policy sooner than anticipated acted as a tailwind for the US dollar. This, in turn, continued lending some support to the USD/CHF pair and helped limit any meaningful slide.
From a technical perspective, the intraday movement remained confined in Friday's broader trading range, forming a rectangle on hourly charts. Given the recent sharp pullback, the rectangle might be categorized as a bearish continuation pattern.
Meanwhile, technical indicators on the daily chart have been losing positive traction and add credence to the negative setup. However, RSI on the 4-hour chart remains close to the oversold territory and warrants some caution for aggressive bearish traders.
Hence, it will be prudent to wait for some strong follow-through selling below the 0.9130 region, or the daily swing lows, before positioning for any further depreciating move. The USD/CHF pair might then accelerate the slide towards the 0.9100 mark.
Any subsequent decline is likely to find decent support near the very important 200-day SMA, currently around the 0.9070 region. Failure to defend the mentioned support levels will be seen as a fresh trigger for bearish traders and prompt fresh technical selling.
On the flip side, the 0.9170-75 region might continue to act as immediate strong resistance. This is followed by the 0.9200 round-figure mark, which if cleared should allow the USD/CHF pair to retest three-month tops, around the 0.9270-75 region touched earlier this month.
USD/CHF 1-hour chart
Technical levels to watch
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