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USD/CHF Price Analysis: Bulls looking for a discount for deeper test of resistance

  • USD/CHF bulls keep hold of the reigns, but for how much longer?
  • USD/CHF bears waiting for the market structure to give way to the downside. 

Further to this week's, The Watch List: Gold, USD/JPY, AUD/USD, EUR crosses and many more, USD/CHF is indeed testing deep into the resistance on the monthly time frame in what is a broadly bearish trend. 

The following is a top-down analysis that illustrates where the next trading opportunities might arise across the time frames all the way down to the 15 and 5-min charts. 

Prior analysis

USD/CHF, swing trade, set-up ripening

The market is bid in the open this week and has already crossed the resistance which is now turning support on the 4-hour chart.

A buy limit at the structure offers1:3 risk to reward set up with a stop loss placed below a 78.6% Fibo of the bullish impulse. 

Live market

ISD/CHF has since exploded to the upside on two occasions, the first for which wasn't giving the bulls a discount and a rally too far that invalidated any further setup. 

The market subsequently fell back to the entry-level, but it was certainly a higher risk setup.

Nonetheless, the market did finally rally to the target and slightly beyond. 

At this juncture, the cat can be skinned in a number of ways and the following is a top-down analysis that illustrates where the next day and swing trading opportunities might arise from. 

Monthly chart

With the rally moving in towards the old daily and weekly highs, the market is testing once again an area of old strong monthly support that would be expected to act as resistance. Hence why the second rally in the prior trade setups was a higher risk set-up. 

As illustrated, the monthly chart is bearish and a downside extension from the 50% mean reversion opens risk to the 0.8670s in a -272% Fibonacci retracement of the current correction's range.

This would be a medium-term target for the swing traders and bears. 

Weekly chart

The market is bounded by weekly support and resistance which means we need to see a breakout of there for an affective medium-term trade plan.

It could go one way or the other, but the longer-term trend is bearish so the emphasis is on the downside from resistance. 

Daily chart

We have a similar scenario on the daily chart, in a bounded market by support and resistance.

This means there is nothing to do here, certainly from a swing trading perspective at least. 

Until we see either a W or M-formation formed for which can be traded from a lower time frame, trend trading day-trades are also higher risk. 

Hourly chart, day trading possibility 

The following should be regarded as a higher risk trading possibility given that the thesis goes against the broader trend in the market as well as trading into resistance. 

However, the momentum is with the bulls on the lower time frames and a buying on dips strategy can be applied as follows:

The market is due or a correction and given it has surpassed the old highs and how bullish the technical conditions are, there is a high probability that following a correction, the bulls will reengage. 

A correction to the 38.2% Fibonacci would be significant enough to begin to look for an optimal entry point from 15-min price action and bullish structure. 

15-min chart

The W-formation offers further conviction that the price is about to correct as the neckline will typically draw in the bids. 

However, there will most certainly need to be a bullish structure formed prior to engaging in any bullish signs of an upside continuation, because the W-formations is typically a bearish pattern and the price can easily move lower again. 

Therefore, a deeper stop loss would need to be applied to any long position targeting a higher high to allow for any adverse price action moving against a long position. 

On the flip side, traders can fade the current rally and target the 15-min neckline of the W-formation 

5-min chart

The environment is still far too bullish for a setup.

As soon as the price moves below structure and the 21-moving average, MACD will be on the way or already in negative territory.

A bearish entry from a bearish resistance structure, possibly on a sell-limit order, would suffice for a high probability setup to the W-formation's neckline. 

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