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I’m going to get started today on the US Dollar versus the Swiss Frank [USDCHF]. Starting here on the Weekly Chart, get a longer-term perspective for this currency pair. Previous downtrend, we’re going from the high up here, right about the top of the yellow-shaded area on the left-hand side of the chart. From the high, down to the lowest low on the chart with Fibonacci, and we find that the 0.886 fib sits at 0.9708.
So, 0.9708, .886 fib of this previous downtrend. What’s interesting about that is that it’s sitting right at the top of this pink-shaded area and of course very close to the 0.9700-level – that double zero level – as our current resistance. And we could call it our current resistance because several days ago, we saw the market find resistance here. Two weekly candles. This is the Weekly Chart, so two weekly candles. One week closed, the second week opened right here into this pink-shaded area, and we saw a pretty decent reversal going all the way back down into the 0.9400-level.
Now we’ve seen it come right back up underneath this same pink-shaded area and that same .886 fib into 0.9700. So, where you see the market approaching the current resistance. And closer it gets to that pink-shaded area and the closer it gets to that resistance becomes very discouraging about buying it because we are finally coming right back up into that resistance level.
If you’re going to buy this, there’s really two better ways to buy it. Better timeframes to buy it, and that would be as it comes back down towards support, which would be of course back down towards the purple-shaded area or at least closer to it as our current support that’s back there where the .786 fib is into the 0.9594-level and into that purple-shaded area. You can follow it back in time. You could see some other instances of resistance into that purple zone that also help us identify it as support.
So, that becomes an opportunity to buy the USDCHF. The other opportunity would be the breakout above the resistance. So, as long as we hold within or under that pink-shaded area, it’s very discouraging about buying it and we would be more likely and more apt to buy it if it takes a dive back down to support or breaks through that resistance. Until it does that, there is the possibility of resistance and reversal here for the USDCHF underneath that pink-shaded area.
And of course if it breaks out above there, we would look for the continuation all the way back up to the yellow zone. Why there? Because that’s where the last time we see the market pressuring above the pink zone, went all the way back up to the yellow zone, and even if I zoom it back a little bit in time, just scroll it back. You could see above the pink zone taking a turn towards the yellow-shaded area on the far left-hand side of the chart, and that’s all the way back into 2012.
So, this is the area we want to focus our attention on for the day today on the USDCHF. Take it on down to the Daily Chart. Now, of course what is the trend. The trend is up. We see higher highs and higher lows in the long-term sense of it. Along the red trend line at the bottom and coming from the bottom left-hand side of the chart, the trend is up. So, we could focus our efforts in that direction, but we, again, want to wait for the right timing, dips to support, or breaks above resistance. As long as we’re under resistance, it’s not the right timing to buy the currency pair even within the overall uptrend.
Now, as we sit underneath the pink-shaded area, we watch for clues and evidence of reversal because, at some point in time, we could see that clues and evidence. It could be candlestick formations, patterns, even a double top here as we see so far. We’ve created two times testing here into the pink-shaded area. It could be the clue that we need for potential reversal, but then we’d look for a change of the trending pattern, where right now we have higher highs and higher lows, we would start to look for lower highs and then again lower lows, which at this point would probably need a breakdown of this blue trend line and of course that purple-shaded area if we were going to see a change of the trending patterns.
So, nothing really there to tell us that. And literally we could see the market bounce around in here for a few days, between the pink and purple-shaded area. It doesn’t have to breakout today. It could stay within here, going all the way into Friday, when we see non-foreign payrolls out of the US on Friday. That’s a possibility. So, definitely the two areas we want to pay attention to though or look for potential trading opportunities are the pink and the purple-shaded area.
Forex Black Book trend bar is red, but as I discussed in the Trade Room yesterday, I’m not really ready to trust that yet, until I see a change of the trending pattern and, again, lower highs and lower lows begin to develop here for the USDCHF. 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 a couple of days ago. Actually we’re going all the way back to last Friday because so far this week, we haven’t seen any new bank flow levels.
We go back to last Friday. Let me zoom it out one time, and we could see our bank flow levels sitting right here at the pink-shaded area. So, there was a presence of sell orders there into the pink-shaded area as of Friday. And of course, as we approach there again today, there’s a possibility that there are still some lingering sell orders as we saw the bank flow levels there on Friday. If they get some momentum behind them, then we could see another turn back down here towards the purple-shaded area. So, again, just like I mentioned a few minutes ago, the closer it gets to that pink-shaded area, we know there’s a potential influx of sell orders. We know the .886 fib from the Weekly Chart sits there at 0.9700, of course the 0.9700-level being a psychological barrier in the market.
All of that pointing to the fact that I don’t really want to buy this very close to that pink zone. I want to buy it further away, like it was down there several hours ago into the purple zone, into the 0.9600 or even into the 0.9500s, or I’m looking for the breakout above resistance. And it could simply be 0.9675, which is the bottom of that pink-shaded area. So, buyers, buy on dips to support or breaks of resistance. Otherwise, there are low risk, high reward opportunities for reversal here into the pink-shaded area.
If it stays underneath it, then we could look for it to go back down. If you’re a seller, looking for reversal for the USDCHF, the higher it gets, the closer it gets, 0.9675, 0.9680 becomes a fairly minimal risk opportunity for reversal. Selling. Then your risk is just above the pink zone. That way, if it breaks out above it and you have limited the loss that you would typically take if it does break out above there. So, for the day today, my suggestion is potential sells on rallies into the resistance level with limited risk. Stop losses just above 0.9700. That way, if it breaks out, you could flip that and start working back higher. Again, our target back higher would be back here towards the 0.9780 or even into the 0.9800-level, the yellow-shaded area back at the top of the chart for the USDCHF this week.
