USD/CHF Finding Resistance At 50% Retracement Level

December 11, 2012 in Forex Analysis

USD/CHF had seen a great fall from the beginning of June 2010 to August 2011. The recover had started after that and had continued till it completed the 61.8% retracement of the previous great fall, when the currency pair reached a high of 0.9972 after nearly 1 year from the low of 0.7069.

The 61.8% retracement level brought a strong resistance and the subsequent price action managed to break below the trend line support which had come into existence with the previous lows which were continuously rising up.

The following weekly chart shows the above mentioned price actions:

USD/CHF Weekly Chart- The price action during past 2 and a half years

The break of this trend line support was also the break below the 50% retracement, which should have also acted like a support. Hence the pair had actually broken the combined support of the trend line as well as the 50% retracement of the previous great fall.

Subsequent Price Action – The Supports Became Resistances:

Past the break of the combined support for 7 weeks the 50% retracement level had been acting as resistance and that continued till November 5th, 2012 when the resistance was finally broken. The honeymoon did not last for long as just above the trend line which was acting as support level, now proved to be a resistance.

Recent Price Action:

There was another short fall and it again took USD/CHF below the above mentioned 50% retracement. For past 3 weeks this level has again proving to be the resistance.

What Can Be Expected:

As the recent drop did not retest the low of October and the support came well above that, it indicates a lack of any strong bearish sentiment. USD/CHF carries a very strong positive correlation with EUR/USD and the continuously changing sentiments in Euro zone have been causing a lot of market noises. Overall our views remain same that EUR/USD may again have another fall and on the other side USD/CHF should make another upward break. A decisive break over 0.9400 is the first hurdle and once that takes place then a test of 0.9500 psychological level should take place. The support turned resistance trend line now indicates 0.9600 as the second resistance after the psychological 0.9500.

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