USD/CHF started the week lower as stocks continued to plunge in Asia. Risk off appears firmly in place and this currency pair may remain flightless if we continue to see the major indexes selloff for a fifth consecutive day.
Price action on the USD/CHF daily chart shows that the recent tumble appears poised to extend its decline beyond the 100-day SMA. At the end of July, a bearish Gartley pattern was targeted and the resistance area (shown in red) provided a key turning point for the currency pair.
The Swiss franc may continue to appreciate if the People’s Bank of China hesitates easing further. If they do not cut rates soon, we could see .9250 targeted early this week.
The bullish trend for both equities and USD/CHF may eventually return on the improving US economy. In the short-term, key support will come from the .9150-.9200 zone. Beyond that area, major support will come from the psychological .90 handle.
The trade: Buy USD/CHF at .9150 with a stop loss at .9050 and a take profit at .9350. The Risk/Reward Ratio is 1:2.
Edward J. Moya
Chief Technical Strategist
WorldWideMarkets Online Trading