CHF at Key Area - Where Do We Go From Here?
Currently, price is resting at 1.20255, within this zone. The SMA's are pointing toward a downward trend coming into it, and price has been respecting the upper trendline of the . Obviously I cannot predict what will happen here, so let's look at a few factors.
First, the last time CHF formed a similar to this was back in August-November of 2019 (chart below). Price came into this in an uptrend, and this followed a similar pattern. Price broke out of the top trendline, then came back to retest the before breaking up. Our current is much larger, but the structure is similar.
The most obvious difference between these two is the amount of testing of the . Whereas the earlier tested the a bunch of times, our current is just in its second touch. This may suggest that we have some room to go before the breakout. However, the only has a couple more weeks before we run out of space.
Second, we can consider some basic fundamentals. The Swissie is a safe haven currency. With the current market sentiment being risk-on overall, we can look at the three major safe-havens - USD, JPY, and CHF. USD and JPY have both been weaker than the CHF over the past year. A quick look at the USDCHF and CHFJPY pairs shows an obvious bias for the Swissie.
So, what do we expect? The CHF could break either way really. There's a case for an upside move as the CHF has fared better than the USD and JPY through the worldwide pandemic. Furthermore, the last like this resulted in a strong move to the upside. However, that is a long downtrend we have seen in the CHF for the past year. Zooming out to look at the Weekly chart, it may seem that the CHF is due for a serious retracement. The 20 period and 50 period SMA's have crossed, so there may be some room to fall back to the 200-period .
I will be watching the CHF closely in coming days/weeks. Specifically, I will be looking for a break of this that has the CHF in a tight range now. Should it break either way, I will wait for a failed retest to begin looking for trades. Although I do often take breakout trades, there's a fair posibility that the CHF will break out one way and come back quickly to retest the broken line/zone.
Do you have thoughts on which way the CHF is headed here? Let's hear them!