USD/CHF sets a floor near fresh 6-year lows; bearish overall

USDCHF, capped by the 20-day simple moving average (SMA), inched down to a new six-year low of 0.8814 on Wednesday.

While the recent negative correction resurfaced fears of a stronger downtrend, the 0.8824 support region, which acted as resistance back in January 2015, continues to hold firm, giving another opportunity for a rebound.

The technical indicators are not in favor of bullish actions, but cannot exclude the case of an upside reversal either. The MACD, although stable, is still some distance above its red signal line in the negative section, while the RSI has already bottomed twice in the oversold area before side-lining below 50.

A successful run above the 20-day SMA currently at 0.8880 could help the pair to recover towards the base of the previous range at 0.8990, where the restrictive Kijun-sen line is lying and the 50-day SMA is heading. Higher, the bulls should push harder to drive through the Ichimoku cloud and the 0.9085 – 0.9140 zone. If that boundary cracks, the 0.9200 level could immediately come to the defence of the September peak of 0.9295.

If sellers achieve a close below the 0.8824 floor, the pair could weaken towards the 0.8760 barrier. Another leg lower may face limitations somewhere between the 0.8678 and 0.8595 hurdles last seen in January 2015.

In short, USDCHF seems to be setting a floor for a rebound, though whether any upside correction can be sustained in the near term may depend on the 20-day SMA.