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Forex: Ideas You Can Trade - USDCHF Testing Bearish Support Over 93.00

 

USDCHF: Drop tests medium term bearish support line and reveals coinciding support line of additional bearish channel 

The medium term daily candle chart below shows the price history of United States Dollar (USD) versus the Swiss Franc (CHF). This currency pair is known as USDCHF, and trading around .9333 around time of publication and near fresh session highs after recovering from .9276 earlier.

Last time this pair was reviewed in Ideas You Can Trade was shortly after the Swiss National Bank (SNB) had shocked markets with an unexpected announcement to discontinue its exchange rate peg on the EURCHF pair on January 15th. In the following post about USDCHF - one week after that event - the long term downtrend was thought to be resuming but the pair quickly recovered towards current prices as the USD strength was in full-force in recent months.

Now that the USD is starting to correct across a number of currencies, despite recovering today against the USDCAD and GBPUSD pairs, the USDCHF pair has fallen in recent days and is testing two intersecting support areas (one coinciding near today's low). 

The first area is a longer term bearish trend line (see red line on chart below) and the other is the lower line of a bearish channel drawn from the high of the SNB announcement - towards current prices (see channel below in purple color). These support lines point lower and therefore a lower-low seems likely, whereas a bounce could enable a brief recovery that could continue if the support above .9400 is regained in the short term. 

Below are examples of how to trade a bearish continuation or a bullish reversal:

1.  BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .9359 with a Limit to take profit @ .9395 and a stop-loss @ .9525 Risk/Reward Summary: Limit risk = 36 pips profit / (-34) Stop-loss risk = Gain to Loss ratio = 1.06

2.  BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .9276 with a Limit to take profit @ .9210 and a stop-loss @ .9331  Risk/Reward Summary: Limit risk = 66 pips profit / (-55) Stop-loss risk = Gain to Loss Ratio = 1.20

Medium term daily candle chart:

USDCHFDaily May 1 2015 note

Weekly long term candle chart:

USDCHFWeekly May 1 2015 note long term

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