The 4H USD/CHF chart shows a market in a correction after a sharp rally. The sharp rally from 0.8567 to 0.8960 respected the 200 period simple moving average. Then 2-downswings came down to find support at the 50% retracement level at 0.8763. These 2 swings down appear to have been a completed ABC correction with C-A wave equality. Now, if the market rallies back above the projected resistance/trendline and above 0.89, we are likely in a bullish continuation. Note the bullish stance of the RSI as well (tagging 70 then failing to break below 40). A rise back above 60 in the RSI reading reflects the maintenance of bullish momentum and suggests bullish continuation. The upside has 0.8960 as an important resistance to break. After clearing this pivot, the market opens up the 10/20 resistance pivot at 0.9080 in the short-term, and a more aggressive target toward a former support (for 10/4-10/7), at 0.9144.
The 1H chart shows the consolidation in more detail. Note that even in the 1H chart the RSI has not sustained a break below 40. Furthermore it is still trading above the 200SMA after testing it as support. Therefore, technical look has a slightly bullish bias, that can be improved with a break above 0.89. However, if the market fails to break the projected resistance/trendline, we might have another wave down to complete a 5-wave flag pattern toward 0.8717, 61.8% retracement. If the market then fails to rally back above 0.8800, the market might have turned bearish, otherwise, there is still a bullish outlook, if the market bounces back up above.
The October Non-Farm Payroll was slightly disappointing, 80K, missing 97K forecast and down from 103K for September. It is still to early to assess the market reaction as it has been subdued and indecisive. The bad number can actually help the USD if the market is risk-off. However the USD can also suffer speculative pressure of a higher chance of QE3 after the poor jobs number.
Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.