USD/CHF: patience is key for potential sellers

For the past two weeks, I’ve waiting for a proper sell signal on USDCHF. I’ve waited and waited, but we still don’t have one despite a really nice bearish setup. Yes, there is a difference between those two. There is a setup, but no signal. Let me explain that in a greater detail.

Both of these currencies are considered safe heavens. There’s a slight difference in that CHF is said to be a bit safer than USD. The market is currently in Risk ON mode, which means that traders are OK with riskier assets. That is why demand for CHF is really low and this currency is in defence mode, giving the green light for moderate gains on the USDCHF.

It looks much better for the bears from a technical point of view. First of all, the pair is trading beneath the neckline (black) of the big triple top formation. What’s more, we’re in a correction of the main mid-term trend that started at the beginning of March (after third top), and that trend is bearish. In addition to that, the correction is a flag (blue lines); a formation that promotes a breakout to the downside. Furthermore, most recently, the pair tested an important horizontal resistance (yellow) and two crucial Fibonacci levels (50% and 61.8%). This is quite a big accumulation of negative factors. There’s only one real reason that a sell signal hasn’t been triggered yet; we need to wait for a breakout of the lower line of the flag. Why? Cause that would trigger this formation but also would mean that all the resistances worked and that the price bounced from them.

At the moment, we can see something like a small irregular head and shoulders pattern (orange head bouncing from three resistances at once). This can be considered another negative factor in our basket. It does not change too much though. A legitimate sell signal will only be triggered when the pair reaches the green cross, which would mean the end of the flag formation.