Since the end of December, CAD/CHF keeps on making higher lows and higher highs, which resulted in the pair forming somewhat of a rising wedge pattern, which now will be closely monitored. We will especially keep an eye on the lower side of that wedge, as according to the textbooks, such patterns tend to break to the downside. But it is unknown for how long the wedge could keep on building up, hence why we will remain somewhat bullish over the pair’s near-term outlook.
Even if the rate slides a bit lower, as long as the bottom side of the wedge remains intact, the decline could be seen as a small correction, before another leg of buying. We will then target the 0.7588 barrier, as the next good potential resistance zone, which is the highest point of December. If this time CAD/CHF is able to overcome that barrier and push further up, the pair might easily travel to the 0.7618 obstacle, marked by the intraday swing low of November 16th and the intraday swing high of the day before.
Looking at our oscillators, both are showing signs of topping. The RSI, after reaching the 80 zone, has moved a bit lower but remains above 50. The MACD is also showing slowing momentum and has turned somewhat flat but is still above the zero line and its trigger line. Both indicators support the case for some retracement before the next positive leg.
On the downside, if the lower side of the aforementioned wedge breaks, this means that the bulls could be losing the battle, which may lead CAD/CHF lower. But in order to get more comfortable with much lower levels, we would like to see a clear break below the 0.7517 support area, as such a move could invite even more sellers and the pair may slide towards the 0.7470 obstacle, marked by the low of January 29th. Even if that support zone is not able to withstand the bear-pressure, CAD/CHF might drop further down to test the 0.7439 hurdle, marked by the low of January 24th.
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