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Since our previous USD/CHF post, the pair broke to new lows in a seemingly direct route. We raised the potential for a 300-point drop and our bearish view remains whilst we trade beneath the 0.9788-0.9808 resistance zone. If successful, it could reach for the 0.9526/34 lows, although a correction needs to play out first.

 

Stalling above 0.9650, the rebound didn’t come as a huge surprise. A bullish hammer stopped just shy of key support and the bearish move had become extended beyond its lower Keltner band (not pictured) to warn of mean reversion. This means momentum currently favours bullish intraday traders, but then one trader’s trend is another’s correction.

 

Some bulls may point out the hammer low is reminiscent of the bearish pinbar seen at the 2018 high, making it a key inflection point. Yet we’ll refer to the predominantly bearish structure on the daily chart. The strong momentum which drove prices towards 0.9650 far exceeds bullish momentum in the lead-up to the 1.0068 high, so we’ll assume it to be part of a correction for now. Either way, both camps likely have the 0.9788-9808 resistance zone in focus.

 

The resistance zone comprises of the 200-day average, original breakout level (0.9788) and 0.9808 low, so not an area to ignore. And whilst some bears may be tempted to fade into such resistance, we’d prefer to see evidence of compression beneath it before wading in.

Matthew Simpson CFTe,Senior Market Analyst (Asia)