USDCHF - Weekly technical Outlook

By IBTimes Staff Reporter | October 17 2009 9:39 AM

USD/CHF dropped further to 1.0117 last week before recovering mildly. With an intraday low in place, initial bias remains neutral this week and some consolidations could be seen. Nevertheless, short term outlook will remain bearish as long as 1.0358 resistance holds and recent decline is still expected to extend further. Below 1.0117 will bring fall resumption to 100% projection of 1.2296 to 1.0366 from 1.0883 at 1.0033, which is close to parity. However, break of 1.0358 will signal that a short term bottom is at least formed and will turn focus to 1.0452 resistance.

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In the bigger picture, whole set of price actions from 1.2296 are treated as correction to the medium term rally from 2008 low of 0.9634. Fall from 1.1963 is the third wave of such correction in form of five wave sequence (1.1158, 1.1740, 1.0590, 1.0883, ?). With 1.0452 resistance intact, there is no indication of bottoming yet. Nevertheless, USD/CHF should lose downside momentum as it approaches key cluster support level of 1.001, 100% projection of 1.2296 to 1.0366 from 1.0883 at 1.0033, which is close to parity and finally bring reversal.

On the upside, break of 1.0452 resistance will have the medium term falling channel resistance taken out firm. This will be an important signal that fall whole fall from 1.1963 has completed and will turn focus back to 1.0883 resistance for confirmation. Also, this will argue that whole consolidation pattern from 1.2296 has finished too. We'll be looking at the prospect of much stronger medium term rally in such case.

In the longer term picture, a long term bottom is no doubt in place at 0.9634 with bullish convergence condition in daily MACD. USD/CHF failed to take out 55 months EMA and reversed again and thus gives no confirmation of long term reversal yet. We're neutral in the long term outlook for the moment and would wait for further evidence from the markets before making a stance.

USD/CHF