Forex Technical Update

Prev: USD/CHF May be Completing an ABC Correction (8/4)

USD/cHF 8/5/2011 1H chart

- After a zig zag, the market headed south. However, without breaking below our previous low at 0.7608, this can still be just  bear trap for further consolidation, or even a reversal (more likely consolidation).
- This scenario sets up range trading between roughly 0.76 and 0.78. A break above eyes 0.80, a break below targets 0.74 (new record low)
Bearish Continuation:
- The ranging scenario is really missing another test of 0.78. There are already a few attempts establishing support just above 0.76.
- The 1H chart above shows the market with a completed abc correction, followed by a 3 wave decline that completed a wave (1).
- The structure thus suggests bearish continuation. But the RSI has not dipped back below 30 to confirm with momentum.
- Still, the 0.7730 is an important resistance level near 61.8% retracement, and has held so far.
- The market even within the current sideways action appears bearish.
What about the NFP?
- The NFP was better than expected (119K vs 89-91K forecast) and the unemployment rate was edged lower to 9.1% from 9.2%.  However, it would probably take a 200K+ number to convince markets that the US is in position to recover.
- Thus as a safety currency rival, USD might still lose to the CHF.

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Fan Yang CMT
Chief Technical Strategist