Swiss Franc Short-term Outlook: USD/CHF Breakout Faces First Major Hurdle

Swiss Franc Technical Forecast: USD/CHF Short-term Trade Levels

• USD/CHF has broken above a multi-week downtrend after rebounding sharply from the monthly lows.
• The rally is now approaching a major resistance zone that could determine the next directional move.
• A sustained break higher would support a broader trend reversal scenario while failure could trigger a pullback within the broader downtrend structure.
• Resistance 7921/26 (key), 7994, 8041- Support 7873/75, 7840, 7814/17 (key)

USD/CHF is attempting to build on a breakout above a multi-week downtrend after rebounding strongly from the monthly lows. The recovery has improved the near-term technical outlook, but the rally is now approaching a major resistance zone that could determine whether this move develops into a broader reversal or stalls within the larger bearish structure. The focus in the sessions ahead will be on whether bulls can sustain momentum into this key test. Battles lines drawn on the USD/CHF short-term technical charts.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this USD/CHF setup and more. Join live on Monday’s at 8:30am EST.

Swiss Franc Price Chart – USD/CHF Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CHF on TradingView

Technical Outlook: In last month’s Swiss Franc Short-term Outlook we noted that USD/CHF had, “turned from confluent resistance at the yearly open this week with price now poised to mark the largest single-day decline since February 9th. From a trading standpoint, rallies should be limited to 7875 IF price is heading lower on this stretch with a close below 7808 needed to fuel the next leg of the decline towards the April lows.” A short-term recovery into the May open registered an intraday high at 7848 before plunging more than 2% off the late-April high.

The bears could not secure a break below the 61.8% retracement of the yearly range at 7772 with USD/CHF rallying more than 1.8% off those lows. A breakout of the late-March downtrend and the May monthly opening-range highs last week suggests the potential for further gains into the close of the month. That said, the bulls are now testing near-term resistance with a more significant technical zone seen just higher, and the focus is on a reaction there IF reached.

Swiss Franc Price Chart – USD/CHF 240min

 

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CHF on TradingView

Notes: A closer look at Swisse price action shows USD/CHF trading within the confines of an ascending pitchfork extending off the monthly low with today’s rally testing the median line as resistance. Note that just higher the 200-day moving average converges on the objective yearly open and the 61.8% retracement of the November decline at 7921/26. A topside breach / daily close above this pivot zone is needed to suggest a more significant low is in place and a larger trend reversal is underway. Subsequent resistance objectives are eyed at the yearly high-day close (HDC) at 7994 and the January high at 8041.

Initial support now rests back at 7873/75 and is backed by the weekly range low at 7840. Near-term bullish invalidation is now set to the monthly open / April low-day close (LDC) at 7814/17. Note that the lower parallel converges on this threshold into the close of the week and a break / daily close below this slope threaten resumption of the broader downtrend toward the monthly lows.

           

 

Bottom line: USD/CHF has broken the May opening-range high with the bulls attempting to validate a breakout of a multi-week downtrend. From a trading standpoint, losses should be limited to 7814 IF price is heading higher on this stretch with a close above 7926 needed to fuel the next major leg for of the advance.

Keep in mind the economic docket is rather light this week and traders remain focused on the ongoing conflict in Iran. A lack of progress in the negotiations continues to weigh on the outlook for energy prices and rising inflation expectations has fueled a shift in the outlook for Fed policy. Markets are now pricing a 60% probability the Fed will hike rates before the end of the year. At the same time, Treasury yields have continued to breakout with the long-bond extending to 19-year highs. Keep an eye on these USD tailwinds and watch the weekly close for guidance. Review my latest Swiss Franc Weekly Forecast for a closer look at the longer-term USD/CHF technical trade levels.

USD/CHF Key Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

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--- Written by Michael Boutros, Sr Technical Strategist

Follow Michael on X @MBForex