USDCHF breaks back into its rising channel
USDCHF decisively broke above its rising channel bottom on Thursday and followed through on Friday to close the week at 1.2423.This pair had earlier closed below this rising channel the previous week.
In Dec’04, USDCHF put in a bottom at 1.1290 (weekly chart) and advanced from 1.1368 in Jan’05 to 1.3289 in Nov’05 where it topped out. After a shallow decline and a failed attempt at retesting that peak, the pair declined sharply and hit a low at 1.1920 in May’06, and then consolidated for the next three months forming a rising channel. Price broke out of this pattern in early August 2006 and stayed briefly below the breakout point before it turned around and closed back into the rising channel last week.
Figure 1: Weekly Chart
What does this turnaround mean for this pair? First, lets look at the daily chart.USDCHF had earlier broken and closed below its rising channel on Aug 04’06 only for it to reject that level defined by the horizontal trendline (1.2187) and its early July swing low(1.2180) at the end of last week. This development suggests that higher price gains to consolidation are on the cards. The momentum indicators displayed at the bottom of the chart are
not yet overbought so it is safe to expect more price gains in the days ahead. In addition, a potential double bottom is now in place and a break above 1.2595 levels is needed for its confirmation. On further upside price gains, USDCHF’s next target is the 200 ema now at 1.2529 ahead of July high/.50 Ret at 1.2595/1.2603 and finally the channel top/.618 Ret at 1.2759/62 zone.
Figure 2: Daily Chart
On the whole, should the price break below the channel bottom and 1.2194/80 levels, this would void USDCHF’s short-term upside outlook and push the it towards its year to date low at 1.1920.
Happy Trading
Mohammed Isah is a private trader and an independent technical analyst. He initially traded stocks and now primarily focuses on forex. He produces Weekly, Mid-Week and Friday forex technical research which is available at
www.tradingmarkets.com/fxtechnicalresearch. He also has a Daily, Weekly and Monthly pivot points reports. You can contact Mohammed on his pivot points reports and other enquiries at:
isahmo@gmail.com