USD/CHF - Suspected Correction Stalls At A Pivotal Level

Near the end of March, we outlined USD/CHF’s potential to rebound before its next leg lower. With the rebound having since occurred, we’re now watching closely for signs of bearish momentum to return.

Near the end of March, we outlined USD/CHF’s potential to rebound before its next leg lower. With the rebound having since occurred, we’re now watching closely for signs of bearish momentum to return. 

Part of the rationale for an ‘eventual’ break lower was based on the tendency for April to be the worst month of the year for DXY (USD index). If DXY is approaching a typically tough month, then it points towards broad-based weakness for the greenback and alleviates pressure from other markets. 

Just over a week into April, it’s interesting to note that DXY has printed a series of bearish candles near recent highs on the daily chart, whilst EUR/USD is beginning to recover from its lows

Back to USD/CHF, we suspect that recent price action appears corrective which suggests bearish momentum could be set to return. The rise from the 0.9895 low appears on the erratic side, with overlapping candles and abundance of longer wicks. This contrasts with the predominantly bearish candles we saw (with little overlap) as it tumbled from its 1.0124 highs. Moreover, as it’s taken 13 trading days to recover 50% of losses it endured over just 10, it suggests bulls haven’t fully regained control.

A spinning top Doji shows a hesitancy to break higher and the ‘rebound’ has paused near its 50-day average and 50-day eMA. However, as corrections can be a messy affair which leaves potential for another attempt to break higher, we’d prefer to see evidence of bearish momentum returning before assuming a top is in

Switching to the four-hour chart, a break below 0.9972 would also invalidate the correction line and opens-up a run towards the support zone (where the 200-day average also resides). Whereas a break above this week’s high assumes a deeper correction which could better serve bulls on the intraday timeframes. Either way, we’re watching how price develops as it makes its way towards the triangle’s apex.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account