Further buying was seen last week on the USD/CHF following a rebound from a weekly support area painted at 0.9796-0.9902. This increased the pair’s value by 140 pips at the close 1.0145 and drove into the teeth of a faked weekly supply area coming in at 1.0239-1.0131. As a result, traders may want to be cautious about taking medium-term longs in this market this week!
On the other side of the ledger, recent movement on the daily timeframe forced price to close above resistance drawn from 1.0123. Traders need to take this close with a pinch of salt in our opinion. Yes, it was a legit close, but with price teasing the underside of a weekly sell zone at the same time, it could merely be a fakeout to take in stops to drive this unit lower. Keep this in mind while we take a look at the H4 timeframe…
From this angle, the overall picture becomes clearer. See how Friday’s close above the aforementioned daily resistance has opened the path for prices to challenge H4 supply at 1.0260-1.0205. And boy what a supply this is – just look at that selling momentum! Not only does this supply look tasty, it also boasts a Harmonic Gartley pattern completion point between 1.0207/1.0218, a psychological resistance 1.0200 and a potential Harmonic AB=CD approach. The confluence surrounding this area and the fact that its smothered by a weekly sell zone gives us reason to believe that although a little buying may be seen early on to reach the above said H4 supply, this market is likely headed south!
All being well, if we have no other positions running, our team will be confident entering short at market around the 1.0203 mark with our stop above at 1.0264. The first take-profit target will be dependent on how the H4 approaches the supply.