USD/CHF: Potential For A Minor Rebound Before Its Next Leg lower

Whilst the bias for USD/CHF remains for a break to new lows on the daily chart, we see potential for a minor rebound for intraday traders as its correction completes.

We noted recently that DXY could face headwinds as we head into April and, so far dollar bears are doing their bit to keep the greenback under pressure. Looking through last week’s COT report revealed net-long exposure for DXY fell to an 8-month low ahead of the Fed meeting, and their dovish meeting may well add further pressure to USD if Fed revert to an easing mode. With that said, we continuing to monitor USD/CHF to see if it can break lower.

When we last covered USD/CHF, we noted that caution was warranted around current levels (≈0.9900) as the move lower was at risk of over-extension: it had stalled at the 200eMA, tested the lower Keltner band and was near a structural swing low. Three session later, three bearish hammers have formed to show bears are struggling to lift it convincingly from its lows where a direct break of 0.9895 assumes a run towards 0.9800, with the Feb 20118 trendline acting as interim support.

However, dropping to the four-hour chart show potential for a minor rebound for intraday traders. A spinning top doji shows potential to mark a higher low, and the overlapping nature of candle ranges suggests price action is corrective. Furthermore, a minor rebound from current levels would appear consistent with a 3-wave move / ABC correction.

From here we’d continue to monitor for signs of weakness below the 38.2% Fibonacci retracement level and 50-day eMA. And, as momentum on the daily- chart remains predominantly bearish, we suspect upside potential could be limited and for an eventual break beneath 0.9895.