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I’m going to begin the day today on the US Dollar versus the Swiss Frank [USDCHF]. For the past several weeks, we have been studying this previous downtrend identified by the red trend line on the Daily Chart. We started all the way up here into the mid-0.9700s and began the fall that pushed all the way down here into the 0.8700s.
Now, over the past several weeks, we saw a change in that pattern where we saw the market push above the trend line, and then began using the top side of that red trend line as a diagonal plane of support. You see one time here support, a rally higher. Support here, back into late January, and a new rally higher. And once again, the third time now, coming back down to the top side of that red trend line and finding support once again. The question is, of course, are we going to see a rally higher like we did the first two times or is this time going to be the instance where it breaks through and continues the previous bearish trend.
We just don’t know that. We’ve gone into period of congestion here. For the past four days we’ve continued to find support into the green zone at the very bottom of the chart. 0.8865 down to 0.8845 – the green-shaded area has held as our support. The blue-shaded area, which was historical support. We could see the support over here on the left side. We can even see it on the far left-hand side before the lowest low. The blue-shaded area was historical support. We’re now seeing that as resistance.
We’ve seen that before. You could see right here where the market held as congestion between the green and the blue zone for a long period of time. About a week or so holding between the green zone as support and the blue zone as resistance. Eventually breaking back above it, dipping back below it, and then turning higher once again.
So, here we are in that same familiar zone of congestion between the green and the blue zone. The blue zone goes between 0.8900 and 0.8935 or so. We could see that holding as resistance right now. So, the question is: are we going to break below, continue the downtrend, or back above and see some reversal again for this currency pair as it pushes back into the 0.9000-level or higher for the USDCHF?
Let’s go ahead and zoom it in one time here on the Daily Chart. Just get a closer view of all of these level real quick, before we go down to the 4-Hour Chart. Again, there’s our blue-shaded area holding resistance. Green zone holding as our support. Over the past several days, I’ve been talking in the Trade Room about buying into the green-shaded area. So, if you’ve been following that suggestion, at least three days. You could see the past three days have dipped down here into the 0.8860s and give you an opportunity to buy into the mid to upper-0.8800s, and targeting back here towards the 0.8900-level.
So, if you’ve taken that, I would suggest that you begin protecting profit. That way, if it does eventually find resistance here in the blue zone and work its way back down to the green zone, you’ve at least protected yourself from going negative again on any trades that you might be holding. So, right now of course we’re looking at resistance here into the blue-shaded area. And if we can break, if we’re cheering on the buyers to push through here and if the market can break through the 0.8935-level – the top side of that blue zone -, the next target of course will be back here into the pink-shaded area at the very top of the chart. We’ll look for it to push back here. I’m going to try and drag that pink-shaded area over just a little bit further so we can match up with our current market price, and we’ll pull it over there like that.
So, above the blue zone, we go back to the pink zone. Below the blue zone, potential to dip back down towards the green zone. And of course anything underneath the green-shaded area and underneath our last historical lows that we see over here at 0.8845, we’ll likely look for a turn back lower. The new potential support target that we have listed out here is 0.8770. That’s the red horizontal line at the very bottom of the chart. Went back several days ago and looked at some historical support and resistance, and that’s where we found our next potential support down there, into the 0.8700s.
So, that becomes our next target on a breakdown, open and close underneath this green-shaded area. Let’s go ahead and go down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, none of those levels really change. We just get a little bit of a closer view on how that market has been having around these support and resistance. Obviously for the past three days, we found much support into the green-shaded area. That’s what I’ve been talking about. Potential buying into the green zone for the past week or so. We’ve targeted back into the blue-shaded area once again as resistance. We can easily see the past several hours, since yesterday really, finding resistance underneath the 0.8900-level.
Any push through there, a push above 0.8900 into the 0.8920s and 0.8930s, above the blue-shaded area and above this area of congestion that we see back here, we’ll likely look for that turn back into the pink-shaded area at the top of the chart, towards the 0.9000-level. But I think it’s going to take a substantial break above this last resistance high and this resistance high before we can really see that significant push higher.
Now, if you’re not already in a buy, I suggest waiting for one of two things. It either dips down to the green zone and gives you a better lower risk opportunity to buy it or it breaks above the blue-shaded area and likely this area of congestion right here. If you wanted to squeeze that in a little bit, I think that might be appropriate also, but right now this area. We’ll go ahead and identify this area of congestion as 0.8920. Right here in this area. 0.8920 or so. 0.8925. Getting above that, that’s when we’ll begin that next push back towards the pink-shaded area. Otherwise, holding underneath here becomes resistance.
Now, if you’re looking for the opposite direction, selling for the USDCHF, then potential to sell it here in the blue zone. I think we need a rally much higher. We need a rally all the way back up here into the pink zone before I would feel comfortable with selling it, or a breakdown underneath the green-shaded area. Underneath the 0.8845 becomes an opportunity to sell it.
Let’s take Fibonacci of the last downtrend. And I’m just going to go from this high right here, this last spike high, down to the current low. And in doing that from the spike high down to the current low, get it right on that low, we could see right now where the market is challenging into the .236 fib. The .382 right here in the middle of the blue-shaded area. You could see the .328 there. 50% just above it. 0.8945 and 0.8967 is the .618. And then of course we go all the way back up here into the pink zone before we reach the .786 and .886 fibs of just this last leg of the downtrend.
You take it a little bit higher, all the way to the highest high you see here on the 4-Hour Chart, and that changes it just a little bit, but very interesting that the .236 fib is right here at 0.8906. Right where the current market is finding resistance. So that really solidifies that as resistance right now. .236 fib of this last downtrend, right at the blue zone. Anything above that, we challenge back into the 0.8930s and 0.8940-level, which where the .382 is. And of course a continuation, the .618 of this last downtrend all the way back, again, into the 0.9000-level, into the pink-shaded area at the top of the chart.
Anybody that’s holding buys is cheering on the buyers to break through these levels of resistance and continue the bullish price action. Anybody looking for selling opportunities, any one of these could be the opportunity that you’re looking for, for a return of the downtrend for the USDCHF today.
