USD/CHF has been on a downtrend for a quite a while now. But the recent strong recovery that we saw last Friday, gave some hope for the bulls that not all is lost. It also looks that if the pair is forming a double bottom, where today it tested the so called “neckline” and moved slightly lower again. For now, we will remain cautious, but still leaning more towards the positive side. If we get a confirmation break through the “neckline”, we will then start looking at much higher levels.
A strong break of 0.9760 level could only be one part of the bullish case scenario. For us to start examining higher levels, we would need to see a break and a close above the 0.9775 zone, marked by the high of the 29th of August. This way, we could start targeting the potential area of resistance at 0.9810, which held the rate from moving higher on the 28th of August. Further acceleration of the rate could set the stage for a test of the 0.9845 hurdle, or even the 0.9867 barrier, marked by the high of the 23rd of August.
The upside scenario is also supported by our oscillators, the RSI and the MACD. Both are showing signs of positive divergence. Since the 31st of August, both indicators started climbing higher, creating uptrends. The RSI is currently pointing lower, but still is above 50, which is a positive sign. The MACD is currently above zero and its trigger line, which also could be seen as a positive.
For us to start looking at the downside scenario, at least for the short-term, we would need to see USD/CHF breaking below the 0.9725 line, where the pair could fall lower towards the 0.9700 area. That area could initially hold the rate from dropping lower. If USDCHF decides eventually to break it, this could invite more bears to the table and open the path towards the 0.9650 level, or even the 0.9640 barrier, marked by the low of the 7th of September.
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