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I’m going to get started today on the US Dollar versus the Swiss Frank [USDCHF]. Starting on the Daily Chart, we can go back in time and see that this currency pair has been in a downtrend for quite some time. We go all the way back here to the left-hand side of the chart, back in July of 2013, into the mid-0.9700s. The top left-hand side of the chart. The downtrend began. We started seeing lower highs and lower lows.
And over the past several weeks, we saw a new low made down here into December of 2013. A new low made right around the 0.8800-level, into the 0.8790s. And then, over the past several weeks, we’ve seen the market rally back higher, dip to support, rally higher, dip to support, rally higher, and dip into support, several times challenging the top side of the red trend line that was the previous down trend line.
Well, here we are once again, challenging the top side of that same down trend line, but this time is a little bit different because we’ve now made a new lower low. We could see the market spiking all the way down here into the 0.8770s, a little bit lower than the last low spike that we could see previously. So that gives us a new trend line. We could see that the previous trend line was this red trend line. I’m still going to leave it there because I think it’s still significant as an indicator of current support, but let’s add in another trend line.
I’m going to leave that thicker red trend line there and we could see that now we have a new down trend line. We have a high prior to the lowest low on the chart, and that’s well above the current market. So, if we’re going to see a challenge of that trend line again, it’s going to take a pretty significant rally higher to challenge that longer-term down trend line now. But now we’re sitting on top of that previous red trend line that we could see down here into the upper-0.8700s. Again, three times we tested the top of that red trend line as support. Here we are the fourth time testing there.
Historically, we could see that 0.8770 to 0.8797. We’ve gone back in time and studied multiple supports back in history in the Trade Room and we could see that that’s holding support right now. As long as it stays above this yellow-shaded area at the very bottom of the chart, I believe there’s greater possibilities of intraday reversals. Bounces back off of this support and rallies back into resistance. Very similar to what happened between the green and the blue-shaded area.
Let me zoom in one time and let’s take a look at that green and blue-shaded area. Last week and over the past several days, we’ve seen the market bouncing around between the green zone, into the mid-0.8800s and the blue zone, into the low-0.8900s as an area of congestion, support, and resistance. And for that time period, we saw support into the green zone, resistance into the blue zone. Within that time period, your best opportunities to sell in the direction of the trend would’ve been into the blue-shaded area as it rallied into resistance. As it dipped into the green zone, there were opportunities to buy into support as we saw historical support there.
Well, I think that’s going to be the same case for this week, here into the yellow-shaded area. At least until we get to the end of the week with significant news, we may see the market bounce around between the yellow zone as support, green zone as resistance. So, if you’re looking to sell this currency pair this week, it’s an obvious point that you would want to sell it into resistance and more likely back towards the green-shaded area, into the 0.8845 to 0.8865-level, as your lowest risk, highest potential reward opportunity to sell it.
Right now, obviously since Friday, we have found support between 0.8770 and 0.8797, so selling right now carries the risk that it continues to find support similar to the way it did there in the yellow-shaded area or the green-shaded area and bounces back up. So, it would be my expectation, if I’m looking to sell it, I’m not selling it now into the yellow zone, but more likely as it rallies into resistance and into the green-shaded area. That becomes our best sell.
Now, there is of course the possibility of breaking down through this support. So, if we do indeed get underneath the 0.8770-level, where we find our last support, then of course we’ll look for it to go lower. That would be the other opportunity to sell the USDCHF this week. Under the yellow zone or back to the green zone, which would be my preferred area to sell back into the green-shaded area. So, that being said, if that’s the preferred area, that’s 40 to 50 pips higher than current market. Then we look for potential support and buying opportunities into the yellow zone. The risk is very low. The closer you get to the yellow-shaded area, the risk becomes lower for buying. You’re targeting back to the green zone. If we see a change of the trend or a challenge to the thicker red trend line, which is now the longer-term trend line, then we likely look for a significant profit as it continues to reverse and rally back towards those resistance highs.
And of course that would take a break above the green zone if we’re going to look for that continuation higher back into further resistance higher. Now, we could take some new Fibonacci levels here on this Daily Chart. Let’s, first off, go from the high here where the two trend line connect. The thicker red trend line and the blue trend line. Let’s take Fibonacci from there, down to the current low. Doing that, we find the .236 fib sitting at 0.8865. That’s the top of the green-shaded area by the way. We find the .382 fib sitting into the blue-shaded area, into the 0.8920-level.
So we have significant resistance. Well, we have potential targets if you take a buy here into the yellow-shaded area today. Those also become retracement zones where you might look for selling opportunities back in the direction of the trend. I’m actually going to take this down to the 4-Hour Chart real quick. Taking it down to the 4-Hour Chart, as it refreshes, we’ll see where last week’s bank flow levels were. They were actually up here into the green-shaded area. Look at, for a several day period. Couple of weeks we saw support into the green zone. The bank flow levels sat right there in the green zone.
If today the bank flow levels come out and they’re here into the yellow-shaded area, of course that gives us great expectation, once again, of support into the yellow-shaded area. I’m looking for that support today. And of course a break underneath changes the picture and we look for it to go lower. Again, back into the green zone. We have Fibonacci retracement levels there. We have historical support – green zone -, which now becomes resistance.
Let’s also do one last thing here. I’m going to take Fibonacci from just the little last downtrend leg we see here. From the high here in the blue zone. The last high in the blue zone, down to the our current low. And doing that, we find the .236 at 0.8812. That’s where we’re currently finding some resistance. Back above there, the .382 is 0.8834. Back above there, the 50% back into the green zone. .618 – top of the green zone. And then the .786 and .886 all the way up here towards the blue-shaded area and to our last resistance.
So, again, if we’re looking to sell it, we want it to rally into historical support as resistance. Likely the green-shaded area. There’s Fibonacci into that green-shaded area. If we’re looking to buy it, close as possible to the yellow-shaded area gives us a lower risk. I don’t think I would sell it right now because we are challenging into support. Only two reasons to sell it for the day today. A break under the yellow-shaded area or a rally into the green-shaded area in the direction of the trend for the USDCHF this week.
