CHF at Key Area - Where Do We Go From Here?
The Swiss Franc basket is at a key level. Since the COVID-19 peak in March, the CHF has been forming a solid descending wedge. Price has not broken below the 1.195-1.205 zone, although it has been tested. This zone was a pre-pandemic resistance, and has since acted as a support for the Swissie.
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 wedge. Obviously I cannot predict what will happen here, so let's look at a few factors.
First, the last time CHF formed a wedge similar to this was back in August-November of 2019 (chart below). Price came into this wedge in an uptrend, and this wedge followed a similar pattern. Price broke out of the top trendline, then came back to retest the support zone before breaking up. Our current wedge is much larger, but the structure is similar.
The most obvious difference between these two wedges is the amount of testing of the support zone. Whereas the earlier wedge tested the support zone a bunch of times, our current wedge is just in its second touch. This may suggest that we have some room to go before the breakout. However, the wedge 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 wedge 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 SMA.
I will be watching the CHF closely in coming days/weeks. Specifically, I will be looking for a break of this wedge 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!
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 wedge. Obviously I cannot predict what will happen here, so let's look at a few factors.
First, the last time CHF formed a wedge similar to this was back in August-November of 2019 (chart below). Price came into this wedge in an uptrend, and this wedge followed a similar pattern. Price broke out of the top trendline, then came back to retest the support zone before breaking up. Our current wedge is much larger, but the structure is similar.
The most obvious difference between these two wedges is the amount of testing of the support zone. Whereas the earlier wedge tested the support zone a bunch of times, our current wedge is just in its second touch. This may suggest that we have some room to go before the breakout. However, the wedge 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 wedge 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 SMA.
I will be watching the CHF closely in coming days/weeks. Specifically, I will be looking for a break of this wedge 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!
Comment:
Looks like the CHF is taking a bounce here upward. Currently shorting CADCHF.