The Swiss Franc has entered a winter sleep for the last couple of years but is it finally ready to wake up from its hibernation?
The volatility on the Swiss Franc pair steadily decreased since summer 2012 and the price movements of the last 2 years have been turtle slow at best. However, there are signs of a significant shift taking place. The Swiss Franc that once moved as fast as lightening against the US Dollar – such as a 4500 pip fall from 2010 to 2011 followed by a 3000 pip rise in the year after – could then be back in a trending mode. Let’s review the technicals.
SWISSY BREAK OF RESISTANCE
As visible on the USDCHF weekly chart, the 2 year consolidation zone had a slight downside angle connected to it. When a Fibonacci retracement tool is placed on the first leg of the correction (magenta), the subsequent pullback retraced back the 78.6% Fibonacci level (on the 2nd leg) before falling down to and bouncing off of the -27.2% Fibonacci target in the 3rd swing high swing low.
Besides the bounce at the Fibonacci target, the 3rd leg moved down in a slow and corrective pattern called the falling wedge. The falling wedge chart pattern often indicates a reversal of trends. The break of the wedge was therefore the first signal that a potential uptrend on the USDCHF was eminent.
On the daily chart the first early signs of an uptrend are visible. Here is a list of factors that support an uptrend:
- Higher highs and higher lows have been confirmed on Friday when a daily candle closed above the top.
- Also a trader could use the 3 bottoms and tops to place a trend channel (blue) on the chart.
- The DTT trend indicators are also confirming the upside momentum on the 4 hour chart (green) but are still cautious with the daily picture (grey = neutral).
PROFIT TARGET ZONE
With the month of July almost at its end, a monthly candle close near its high could signal strength of the bulls – especially if a close could occur above last month’s high as well. The potential target of the USDCHF upside would be the confluence of two Fibonacci levels at +/- 1.07:
- Fibonacci magenta: this weekly Fib retracement has been taken from top to bottom on the monthly chart and shows that price stopped during July 2012 at the 61.8% Fibonacci. The next Fibonacci target is the 78.6% Fibonacci retracement.
- Fibonacci blue: this weekly Fib is showing the targets. Price first halted at the -27.2% target. The next target on the list is the -61.8% Fibonacci target.
These 2 levels offer confluence at the 1.07 level.
What is your view on the Swissy? Do you see long-term bearishness or bullishness and what level(s) need to break before your analysis is valid?
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