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I’m going to begin the day today on the US Dollar versus the Swiss Frank [USDCHF]. Starting here on the Daily Chart, it is clearly evident that this currency pair has been in a downtrend. We start all the way at the top left-hand side of the chart, all the way up into the 0.9800s. Over the past several months, since May of this year, we’ve been in a downward decline, as we see it bottoming out down here into the mid-0.8800s. So, quite a nice fall for this currency pair.
Over the past several days, we’ve seen a challenge of the previous low. This low was sitting here into the green-shaded area, just above the 0.8900-level. And over the past several days, we have seen a break underneath that and a new low made within the overall downtrend. Of course the question will be: are we going to continue the downtrend now that we’ve broken through that low or is there a possibility that we could turn around and have a reversal for this currency pair and we’ll see a little bit of a turn back higher once again?
Well, we don’t know that, but we’ll definitely look for clues to that. Over the past several days, we have been finding resistance into this green-shaded area and support at the lowest lows. Let’s go ahead and zoom it in here on the Daily Chart and take a look at that low down there. And you could see, for today and for the previous five days, we have been holding underneath this green-shaded area, underneath the 0.8900-level, and bottoming out down here at the lows, into the 0.8850s. So, there’s been about a 50 to 55-pip zone between 0.8850 and 0.8900 that we’ve been bouncing around for the past five days or so for the USDCHF.
We’re in a bit of congestion here for this pair. Trending move prior to this. Now we’ve gone into a bit of congestion or you might even call this consolidation for the USDCHF. What will give us a greater expectation of trending action and whether it’s a reversal to go back up or a continuation of the trend will be a breakout of this congestion. It will either need to break above the green zone to begin a journey back higher again, back into the mid to upper-0.8900s or even towards the 0.9000-level, or breaking under this little purple-shaded area and the 0.8850-level will likely continue the downtrend for the USDCHF.
Key to this will be this historical support over here on the left-hand side. If we can get right back above that green-shaded area and that historical support, that will begin that retracement back higher once again for the USDCHF. Let’s go ahead and drop this down to the 4-Hour Chart and get a tighter view of that area of congestion down here. And within that area of congestion, of course the purple-shaded area representing our last support lows and we’ve seen multiple attempts there. Five, maybe even six candlesticks dipping down into this purple-shaded area below the 0.8860-level, but above the 0.8850-level. So, there’s only about ten pips highlighted there in purple at the bottom of the chart.
So, it’s been holding there as support over the past several hours. Since yesterday we’ve seen it holding as resistance into this blue-shaded area, between 0.8875 and 0.8885. So, really, we have only seen this market moving up and down about ten to fifteen, maybe twenty, pips over the past 24 hours that we could see here on the 4-Hour Chart. So, again, we’re looking for a breakout. A push above this blue-shaded area will likely begin the push back towards the green zone, which of course is our last resistance high. And of course above that, we could even see the push higher towards the yellow-shaded area.
So, we’ll look at that as possibility today. Above the blue zone, we go back to the green zone. Above the green zone, we push all the way back to the yellow-shaded area. Now, the opposite side will be true. As long as it holds underneath that blue-shaded area, a challenge of the purple-shaded area is a possibility, but I don’t think there’s enough room here to go ahead and sell it into the blue-shaded area because there’s not a substantial enough profit target. But if it breaks underneath that purple-shaded area, that will be our next clue that we’re looking for a continuation of the previous downtrend.
So, this is the way I would look at this today. Staying above the purple-shaded area provides a fairly low risk, higher potential reward opportunity to buy this, looking for clues to reversal. And as I mentioned, a break above the blue zone, we go back to the green zone. Let’s see. Between the blue-shaded area and the green-shaded area, still only about 25 to 30 pips. However, if we break above these resistance highs, we change the pattern of the trend, which has been lower highs and lowers lows. We see a new high above this recent high into the green-shaded area. We could see a surge all the way back up into the yellow-shaded area, which that is closer towards the 50 to 60-pip mark.
So, definitely a lower risk, higher reward scenario today for buying the USDCHF. And of course that changes and is invalidated once it breaks underneath the purple-shaded area. What about selling at higher levels? There is a possibility of selling up towards the green-shaded area with fairly low risk. If you’re looking for an opportunity, I wouldn’t sell it into the blue-shaded area, but maybe into the green zone becomes a low-risk scenario. The challenge back to the purple zone or lower within the direction of the trend. But I think even better would be a turn all the way back up here to the yellow-shaded area, in towards the 0.9000-level. That becomes a much better, lower risk, higher potential reward because at least at that point you’re targeting back to the green zone and, as we just mentioned, 50 to 60 pips between the yellow and the green zone. That becomes a much lower risk, higher potential reward opportunity.
So, for the day today, I’m going to take that arrow off. Above the blue zone, we’re going back to the green zone. Above the green zone, back to the yellow zone. The yellow zone becomes our best selling opportunity at a higher point. Below the purple zone becomes a selling opportunity for the USDCHF today. Bank flow levels yesterday sitting here into the purple-shaded area. Those have helped us identify support. So, again, I don’t want to sell it into support. I don’t want to sell it this close to the bank flow levels until that level of support has been broken. So, more likely, we’re looking for opportunities to buy this, looking for reversal, challenging a breakout of this area of congestion. A push back to the yellow zone – that becomes our target and then we look to potentially sell this in the direction of the trend for the USDCHF today.
