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I’m going to get started today on the US Dollar versus the Swiss Frank [USDCHF]. I’m going to start all the way out here on the Weekly Chart. Get a larger timeframe viewpoint of this currency pair, and then we’ll go down to the smaller compressions.
First off here on the Weekly Chart, something we haven’t looked at in the Trade Room over the past week or so that I want to point out here is the green trend line that you see here on the chart, connecting the last two highs, going back into July of 2012, connecting here into May of 2013, so that’s the green trend line coming down from the top. And take a look at where it connects into the current market, right here into the purple-shaded area, and we’ve been studying in the Trade Room this purple-shaded area as an area of resistance over the past several days for the USDCHF.
Also here on the Weekly Chart. Take Fibonacci from the top of the blue trend line, right where the blue and the green trend line connect. Take Fibonacci from that high, down to the lowest low that you see here on the chart. Puts the .786 fib right at 0.9594. That’s the bottom of the purple zone. So, we have Fibonacci from this downtrend and the green trend line coming down from the top, connecting right there, right around the same place, into the 0.9600-level. So, very interesting resistance for the USDCHF.
Scoot it back over here. Let’s just pull this over like this. So, we know that this is major resistance. It has been all week long. Major resistance. As long as it stays underneath 0.9600, I expect we’re looking for potential resistance and clues to reversal. Now, it becomes very uncomfortable to buy it underneath this resistance. Think of that purple-shaded area, the .786 fib, the green trend line. Think of that as bricks in a wall. Big bricks in a brick wall. If it can’t break through that wall, we look for reversal. If it does break through that wall, we look for continuation, but we probably have to wait for it to break through that brick wall before we can expect that continuation, so it becomes very difficult to suggest a buy underneath that brick wall that’s there in the market. Only if it breaks through it do you expect acceleration beyond there to the next resistance, which I believe is up there towards the 0.9800-level and the yellow-shaded area that sits up here closer towards the top of the chart.
But if you want to buy it in the direction of the trend, which of course is a good idea. If you want to buy it in the direction of the trend, it’s always good to wait for the breakout or a dip back down to support, which the blue-shaded area would be your first area of support. We’ve talked about that all week long in the Trade Room also; that that would be support here for the USDCHF.
Let’s take Fibonacci from the low down here. We’ll just go from the low of the red trend line to the current resistance high. Now, that could change if it makes a spike higher, so you have to be aware that that high point could change of that fib, but right now that puts Fibonacci, the .236 of that fib, right back down here into the green-shaded area. So, now we have four areas to look for. The purple zone is resistance. Break through there, the yellow zone becomes resistance. Holding the purple zone, the blue zone is support. We’ve seen that in history, and the next area of support is the green-shaded area. So, we have four areas to pay attention to today and of course, with a lot of US data, any one of those could be where the market reacts off of four the day today.
Let’s take that information down to the Daily Chart. And as we get down here, all it does is gives us a little bit of a more detailed viewpoint. We can bring our arrows in here, closer to the market. You could see the blue-shaded area has held support over the past couple of days. We obviously have seen resistance into the purple-shaded area for the past week or so, into the purple zone. A breakout again above there goes higher. There’s the green trend line coming down from the top. There’s the purple zone. There’s the .786 fib right at the top of that purple-shaded area.
Let’s make sure this gets attached exactly to the low and high of that previous trend, that Fibonacci, and we make sure it’s exact, right there into that green zone. So, again, it becomes very difficult for me to suggest buying it right now, even though the trend is up, because we’re running into that brick wall. You would buy it into the blue zone or break above the purple zone if you’re trading the direction of the trend. Otherwise, resistance and clues to reversal could give us an opportunity for a little bit of a pullback or change of this trend.
Let’s go ahead and take all of that information down to the 4-Hour Chart. And as we get down here, we could see the congestion zone that we’ve been sitting in all week long really here for the USDCHF. Zoom it out a little bit. Squeeze it in. Again, resistance is here. We can already see that on the chart over the past several days. We can know that with historical fact what we looked at with the green trend line, Fibonacci, and purple-shaded area that if it breaks through there – we’ll call it 0.9600 to 0.9650 is what that purple zone is representing – we look for it to go higher. Support of course is here. A push underneath that blue-shaded area, which is underneath the 0.9485-level, that’s the bottom of the blue zone. If it breaks through there, we would look for the continuation lower, likely back down here to the green-shaded area.
So, what do you do with this today? Well, I know that we have a lot of news here for the US coming out in just about 50 minutes from the recording of this video at 8:30 Eastern Time. A breakout above the purple zone, we look for the continuation of the uptrend. If you’re looking to buy this, you would actually prefer to buy it close to the blue zone or a breakout above the purple zone. News could drive that breakout. However, news could drive the reversal, so if you’re looking for sells and reversal clues, you’d want to sell it as close as possible to that purple zone, giving you lower risk, and then you would target the blue zone and the green zone. Otherwise, if it doesn’t do that, you would look for the breakout underneath the blue-shaded area to give us further clue of reversal.
So, breaking out of this congestion zone, either holding resistance at the purple zone and going back down, breaking through the purple zone and going up, or the blue zone. Holding support and the blue zone, going back up, as it’s already done over the past several hours, or breaking through the blue zone and going back down to the green zone. I think we want to see a breakout today before we’re really confident in direction. I think news could drive the directional purpose or focus for this currency pair over the next few days. So, a breakout, whichever it is, above the purple zone or below the blue zone, could give us a direction to shoot for over the next few days for the USDCHF.
