USD/CHF Drifts North Within an Upside Channel

JFD Team JFD

USD/CHF moved higher yesterday, breaking above the resistance level of 1.0010. That said, the rally was stopped slightly above the 1.0030 zone and today, the rate retreated to test the 1.0010 barrier as a support this time. Overall, since March 20^th, most of the price action has been contained within an upside channel and thus, even if the rate retreats a bit more, we would expect the bulls to take the reins again soon.

A move below 1.0010 may allow the rate to slide towards the lower end of the aforementioned channel, from where the bulls may jump back into the action and aim for another test near the 1.0030 area. A clear break above that zone would confirm a forthcoming higher high on the 4-hour chart and could carry extension towards the 1.0052 level, marked by the high of March 15^th, or the upper bound of the upside channel.

Taking a look at our short-term oscillators, we see that the RSI turned down after it hit resistance near its 70 line, while MACD, although above both its zero and trigger lines, shows signs of topping as well. These indicators suggest that the upside momentum has started to fade somewhat, and support our view for some further retreat within the channel before the next positive leg.

In order to start examining the bearish case, at least in the short term, we prefer to wait for a break below 0.9980, a support marked by the low of April 9^th. The rate would already be below the lower end of the upside channel, while the aforementioned break would confirm a forthcoming lower low. The bears may then shoot for the low of April 3^rd, at around 0.9953, the break of which could extend the decline towards the 0.9930 territory, marked by the low of April 1^st.

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