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by Darius Anucauskas

Is CAD/CHF flagging out?

After rallying from the end of June, CAD/CHF found good resistance just slightly above the 0.7600 barrier and moved back down. We can see that the pair is now gradually moving lower, where some could say that the rate is actually engaged in a sideways action. That said, there is a small tilt to the downside and it looks like CAD/CHF might be forming a flag. Such patterns tend to break to the upside, if preceded by a steep uprise, which we clearly see on the chart. For now, we will stay neutral and wait for a clear confirmation break through the upper side of the formation, before examining higher levels.

As mentioned above, a push through the upper side of the pattern and a break above the 0.7574 barrier, marked by today’s high, could open the door to some higher areas. We will then examine the 0.7587 hurdle, marked near the highs of July 16th and 17th, or even the 0.7596 area, which is the intraday swing high of July 8th. The rate might stall near the last level, or could even correct back down a bit. But if CAD/CHF continues to trade above the upper side of the potential flag formation, we will remain positive about the upside in the short run. Another move higher and a break above the 0.7596 mark, could clear the path to the 0.7611 zone, which kept the rate down on July 8th.

Alternatively, a price-drop below the 0.7540 hurdle, marked by today’s low, could invite a few more sellers back into the game, possibly leading the pair to the 0.7531 obstacle. That obstacle is, so far, the low of this week. If it fails to withstand the bear pressure, a break of it could send CAD/CHF to test the lower side of the aforementioned flag, which could also be considered as downside channel. A potential support level to watch around there could be the 0.7510, marked by the intraday swing low of July 3rd.

CADCHF 4hour

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