I Expect A USD/CHF Drop

When the NFP data came out on Friday the USD showed strength and moved north.

In my opinion, however, that was a temporary reaction and next week we will see a weaker dollar.

USD/CHF, despite the visibly exhausted bullish trend and the obvious need for a correction, moved north with about 40 during the news event , reaching a new high at 1.00225.

On the W1 time frame the pair is at a strong resistance and despite the minimal rally next week I expect there will be a bearish correction. In my option, the depreciation may reach 0.9570 – 0.9550.

The possibility for a correction is also confirmed by the RSI divergence on the H4 time frame, which is between four highs and is a signal for a trend reversal.

USD/CHF Is Rising To Test The Breakout

After USD/CHF broke out below the pennant the pair had formed it fell with about 500 pips without meeting any serious support – from 0.96833 to 0.91872. That is especially obvious on the D1 time frame.

I expect that in the next few weeks and months the pair will rise to test the trend line it broke out below at 0.95 or even around 1.0 – 1.01. It is possible that test to continue throughout the year before the depreciation continues.

From a purely technical analysis point of view, if the limit of that pennant is reached then in the long term the USD could fall with close to 3000 pips. That is, if the Swiss Bank allows it.

USD/CHF May Be Renewing Its Drop

There may finally be a breakout to the downside of the pennant that has been developing for six and a half years on the monthly USD/CHF chart.

This pair is truly unique in terms of the sheer stubbornness of the investors and especially of the Swiss Bank not to allow any further rally of their national currency. On the other hand, however, before the sharp drop of the US dollar compared to the other main currencies (such as the EUR, the GBP, the JPY) the inertia on the markets seems that it cannot be held back any more and this time there may not be a move the Swiss Bank may try that could stop the depreciation of this currency pair.

I think that if the limit of this pennant is reached we could expect a depreciation of the pair with 3000 pips, which means a long term movement south to 0.6700.

USD Is Losing Strength

During the past week the US dollar lost its strength against all main currencies.

During the past seven days alone EUR/USD rallied with a little over 300 pips, from 1.19154 to 1.22179.

USD/JPY fell from от 113.386 to 110.911.

GBP/USD ralllied from 1.34576 to 1.37441.

I think USD/CHF will probably continue depreciating, unless yet another interference by the Swiss Bank prevents that.

The weakening of the US dollar made investors look for a refuge in Gold and it rallied from 1308.10 to 1339.31.

The USD also continued depreciating compared to the RUB.

I think this depreciation across the various USD currency pairs will continue next week as that is the perspective of the technical picture drawn by the charts.



 

USD/CFH Is Resuming The Move North

Despite the beautifully formed pennant USD/CHF won’t depreciate – on the contrary, it will move north and at this stage there is little doubt about that.

The pair has been developing in a relatively tight consolidation (for such a large time frame like the monthly one) for three months between 0.944 and 0.974. In the meantime it managed to form three spinning top bars on the same time frame right above the support zone at 0.944-0.950.

These bars are an unambiguous signal that we will see a rally in the medium term. The first resistance level to the upside is around 0.9850, followed by 1.030 and above is the red resistance trend line, so the rally could reach 1.056 – 1.060.

USD/CHF Broke Out Below The Support Trend Line Of The Pennant

Despite the Swiss Bank's interference in an attempt to stop the CHF from rising any further it seems that this process cannot be stopped for the moment (apart from the bank taking a new, drastic measure).

The pair already broke out below the pennant that I wrote about in the second half of July 2017>>> . If the pair reaches the limit of the pennant it should fall to around 0.6500. Of course, we should keep in mind that this a long term analysis. After all, the pennant itself developed over the course of six years.

We should also keep in mind that the Swiss Bank’s interferences on the market tend to be sudden and with big consequences for traders and investors.

Still, if this prognosis becomes a reality, that would be a historical high for the Swiss currency.

There Might Be A Long Term USD/CHF Drop

After developing for six years within a wide consolidation USD/CHF might be forming a pennant and if it breaks out below it the pair could reach 0.65 or even fall below that level.

This is, at least, how the situation looks like from a technical analysis point of view, but we should not forget two things:

The large monthly bar from January 2015 was formed for just one day – on 15th January 2015, when the Swiss Bank suddenly announced it would not hold the Swiss franc at a fixed exchange rate with the Euro and that announcement caused USD/CHF to suddenly fall with almost 3000 pips over the course of mere hours.

Still, there is a distinct pennant on the charts and if the Swiss Bank doesn’t interfere with the market again the perspective is that the CHF will rally, as much as the Swiss financial institutions wouldn’t want that.

USD/CHF Could Fall To 0.9843 At The Very Least

At a first glance the behavior of the market appears odd. FED hiked the interest rate, but the various currencies reacted with sharp and strong movements against the USD.

My prognosis that USD/CHF will fall, however, came true.

When it came to this pair I followed the logic of what I saw on the chart, rather than what should happen with such a (at a first glance) strong dollar.

Of course, by principle I have always preferred technical to fundamental analysis.

Either way, there is a very real chance that the USD/CHF pair will reach the limit of the pennant pattern it formed, and that means that it will reach at least 0.9843.

Technical Analysis Says USD/CHF Should Start Falling. Traders Are Waiting For The Fed News

I have drawn the main trend lines of the USD/CHF movements for the past two months and they support the logical expectation that the pair will begin moving to the downside.

There is a breakout below the wedge from 0.98694 to 1.01689, but the pair is in no hurry with the move to the downside, even though its limit is 248 pips.

In my opinion, it is quite possible for the situation to remain without much further development until tomorrow, when FED will announce a possible change in the Federal Funds Rate. There are expectations that the rate will be hiked, and that could lead to a change in the expectations for a move to the downside.

However, the market sometimes reacts oddly to such news and it is still not clear whether that will be the case tomorrow. After the possible news for a rate hike it could jump to the upside and then to continue falling.

There are 24 hours until said news comes out, so we will soon find out which scenario the market will choose.