CHF/JPY rallied on Wednesday after hitting support near 108.23, slightly above the upside support line drawn from the low May 9th. The recovery also brought the rate above the short-term downtrend line taken from the high of June 11th and thus, we would expect the pair to continue drifting north for a while more.
If the bulls are strong enough to take charge again soon, we may see them driving the battle towards the peak of June 17th, at around 108.90. If they are not willing to hit the brakes near that zone either, a break higher could carry larger bullish implications, perhaps opening the path towards the 109.32 obstacle, defined by the high of June 13th.
Looking at our short-term momentum studies, we see that the RSI moved higher, but just flattened near its 50 line. The MACD, although negative, lies above its trigger line and points up. Both indicators support the notion for more advances, but the flattening of the RSI make us cautious over a possible retreat before the next move north, perhaps for the rate to challenge the 108.50 support zone.
In order to start examining whether the outlook has turned to the downside, we would like to see a decisive dip below 108.23, or even better, below the upside support line drawn from the low of May 9th. Such a move could initially set the stage for declines towards 107.92, a support marked by the low of May 31st, the break of which could encourage the bears to put the 107.65 barrier on their radars, which is slightly above the trough of May 9th.
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