Forex Trading Alert: USD/CHF Declines Sharply

By: Nadia Simmons & Przemyslaw Radomski | Wed, Nov 2, 2016
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Forex Trading Alert originally published on Nov 1, 2016, 4:03 PM


 

Although the Institute for Supply Management showed that its manufacturing purchasing managers' index increased to 51.9 in Oct, the USD Index moved sharply lower. As a result, the greenback declined significantly against the Swiss franc. What does it mean for USD/CHF?

In our opinion, the following forex trading positions are justified – summary:

EUR/USD: none
GBP/USD: none
USD/JPY: none
USD/CAD: none
USD/CHF: none – in other words, closing the previous short positions and taking profits off the table appears justified at this time.
AUD/USD: short (a stop-loss order at 0.7769; initial downside target at 0.7542)


EUR/USD

EUR/USD Weekly Chart
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Looking at the weekly chart, we see that EUR/USD extended gains and climbed to the previously-broken blue dashed resistance line.

How did this increase affect the very short-term picture? Let's check.

EUR/USD Daily Chart
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From today's point of view, we see that although EUR/USD slipped under the grey zone and the red line yesterday, currency bulls didn't give up which resulted in a rebound and invalidation of the breakdown. This positive even triggered further improvement earlier today, which resulted in an increase to the orange resistance zone created by the Aug lows, mid-Oct highs and the 38.2% Fibonacci retracement. Taking this fact into account, and combining it with the medium-term picture and the current position of daily indicators (the CCI and the Stochastic Oscillator are overbought), we think that reversal and lower values of the exchange rate should not surprise us in the coming days. If this is the case and the pair will move lower from current levels, the initial downside target would be the grey zone and the red declining line.

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective at the moment.


USD/CAD

EUSD/CAD Weekly Chart
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On the weekly chart, we see that the overall situation hasn't changed much as USD/CAD remains abve the previously-broken upper border of the purlpe rising wedge. Nevertheless, the current levels of the CCI and Stochastic Oscillator suggest that reversal may be just around the corner.

Having said the above, let's check the very short-term picture.

USD/CAD Daily Chart
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From this perspective, we see that although USD/CAD broke above the upper border of the violet rising wedge and the upper line of the blue rising trend channel, currency bulls didn't manage to hold gained levels, which resulted in a pullback earlier today. With this move, the exchange rate slipped under the above-mentioned lines, but currency bulls pushed the pair higher, invalidating this intraday breakdown. Nevertheless, the current position of the indicators (they all generated sell signals) favors currency bears and lower values of the exchange rate. Therefore if we see a daily closure below the upper border of the violet rising wedge and the upper line of the blue rising trend channel we'll consider re-opening short positions. At this point it is also worth noting that if the pair declines from current levels, the initial downside target would be around 1.3153, where the 38.2% Fibonacci retracement (based on the mid-Aug – Oct upward move) is.

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective at the moment.


USD/CHF

USD/CHF Weekly Chart
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On the weekly chart, we see that the key resistance zone created by the long-term red declining resistance line based on the Nov and Feb highs, the green rising line based on the May and Aug 2015 lows and May and Jul highs (marked with orange ellipse) triggered a sharp decline.

How did this drop affect the very short-term picture? Let's check.

USDS/CHF Daily Chart
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Quoting our previous commentary on this currency pair:

(...) USD/CHF moved sharply lower and approached our initial downside target on Friday. Although the pair rebounded earlier today, it is still trading in the yellow resistance zone under the brown resistance line (the red resistance line seen on the weekly chart), which means that invalidation of the breakout above this line and its negative impact on the exchange rate is still in effect. This suggests that another reversal and lower values of USD/CHF are just around the corner.

From today's point of view, we see that the situation developed in line with the above scenario and USD/CHF declined very sharply and significantly earlier today, making our short positions more profitable. With today's decline the pair approached the support zone created by the green support line based on the previous lows, the 50% Fibonacci retracement based on the Aug-Oct rally and the 61.8% retracement based on the May-Oct upward move. Additionally, the current position of the indicators increases the probability of reversal. Therefore, we believe that closing short positions (we opened them when USD/CHF was trading around 0.9938) and taking profits off the table is the best decision at the moment.

Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective at the moment.

Thank you.

 


 

Nadia Simmons

Author: Nadia Simmons

Nadia Simmons
Sunshine Profits.com
Forex & Oil Trading Strategist
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Nadia Simmons

Nadia is a private investor and trader, dealing in currencies, commodities (mainly crude oil), and stocks. Using her background in technical analysis, she spends countless hours identifying market trends, major support and resistance zones, breakouts and failures. In her writing, she presents complex ideas with clarity that enables you to easily understand market changes, and profit on them. Nadia is the person behind Sunshine Profits' 3 premium trading services: Forex Trading Alerts, Oil Trading Alerts Alerts, and Oil Investment Updates.

All essays, research and information found above represent analyses and opinions of Nadia Simmons and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Nadia Simmons and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons's reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Nadia Simmons, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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Przemyslaw Radomski

Author: Przemyslaw Radomski

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same.

His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the current situation.

Recognizing that predicting market behavior with 100% accuracy is a problem that may never be solved, PR has changed the world of trading and investing by enabling individuals to get easy access to the level of analysis that was once available only to institutions.

High quality and profitability of analytical tools available at www.SunshineProfits.com are results of time, thorough research and testing on PR's own capital.

PR believes that the greatest potential is currently in the precious metals sector. For that reason it is his main point of interest to help you make the most of that potential.

As a CFA charterholder, Przemyslaw Radomski shares the highest standards for professional excellence and ethics for the ultimate benefit of society.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer: All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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