Forex Technical Update July 26, 2010  USD/CHF: Assessing Possible Bottom

  • Weekly and Daily: Trying to find a bottom after a sharp decline is a dangerous endeavor. Traders liken it to catching a falling knife. Some say you will have smelly hands for trying to catch the bottom. Also, the weekly chart shows no real signs of reversal yet.
  • With that being said, let's go ahead to see if we find any clues for a bottom in lower time-frames. Before that, I should note the RSI in the weekly is still above 40, after it was in very overbought levels. This did happen when the SMA50 was below SMA200, so really the situation is wide ranging action.
  • The daily shows possible double bottom action if the market can rally and close above 1.0560. As always though, a throwback to confirm is necessary especially for a bullish outlook after a strong decline.
  • The target for a rally if the 1.0560 is broken is 1.09. This is the 38.2% retracement of the decline from the 1.17 top, seen in the Daily chart.

  • 4H: The 4H chart shows a consolidation that may have completed a and b, but c may not be complete. Sure there is resistance at 1.0560, but the wave form of c is incomplete and should see another rally in my opinion.
  • In any case, I won't try to force a count but let the market resolve the current consolidation.
  • This basically helps me prepare for a breakout up top if there is one. Even a break of 1.0560 is not a bullish signal just yet until we see c complete and a subsequent decline to prove to be a throwback. Then, we can say we have established a bottom.

  Fan Yang Currency Analyst Commodity Trading Advisor

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