XM Group - Analytics

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    Technical Analysis – USDCHF oversold after sharp decline

    USDCHF broke out of the ascending channel after rising within it for over a month (on the daily chart). At the beginning of February prices fell below the lower channel support line and this triggered a sharp decline to a 4-month low of 0.9659. This is the lowest since October 2015.

    Prices are now at a critical support level and are testing the 200-day moving average around 0.9720. Meanwhile, there is also important support at 0.9700 at the 50% Fibonacci retracement level of the upleg from 0.9077 to 1.0326 (May to November 2015). If the market falls below this support area, then the downside will likely resume. But since the market is oversold now (as indicated by the RSI which is in extreme oversold territory), then USDCHF might witness a rebound or consolidation in the near term.

    From current levels, a rebound would find resistance at the 38.2% Fibonacci around 0.9850. However, if the market breaks below the key 0.9700 level, then this would renew the pair’s decline towards the 61.8% Fibonacci around 0.9550.

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