The US dollar failed to continue the recent rapid uptrend versus the Swiss Franc, peaked at 1.00646, and lost more than -2.75% (-275 pips, four-digit quotes) of the exchange rate. It’s also notable that the USD/CHF currency pair appeared above the parity for the first time since May 2019. However, this breakout was fake, given the rapid decline towards 0.97473 Francs per dollar (weekly close rate).
Six weeks of gains with quite a rapid appreciation of the exchange rate required a healthy rebound, so it’s not a huge surprise to see such a deep retracement. USD/CHF did not even reach two important support curves (see the weekly chart setup below) – Ichimoku Conversion and Base lines. The bearish retracement continued on Monday, so a test of the support range seems to be inevitable. The main question is about what’s next.
The Ichimoku Cloud indicator is extremely bullish given the spike of the reading span that moved expected support level upwards. All of the other components of the indicator point to a bullish continuation rather than a bearish reversal, at least in the long run. In the short-term perspective, downside whipsaws are possible as volatility remains quite high, which is confirmed by the ADX and DI indicator. Its mainline remains at quite high levels, while the distance between the green and red lines is still significant. The RSI oscillator went off the oversold zone, reflecting the selling pressure, but did not reach the 50% level yet. We expect a test of an important weekly support range, the result of which will determine further trend direction for the pair.
Another weekly chart setup below shows quite a similar picture in terms of the support range of the Williams Alligator indicator. It’s clear that the indicator does not show any sign of a reversal yet.
The MACD indicator has points to a descending histogram in the green zone, easing the overbought conditions, while the lines are far from a bearish crossover so far. The Awesome Oscillator still points to a bullish momentum. The bears have to push the rate much lower, and close the week below important support levels to add arguments to a possible reversal pattern. Otherwise, the recent rebound is nothing but an attractive buying opportunity for long-term positioning. Best wishes traders!!