May 17, 2021 14:39:12

USD/CHF eyes cycle lows and a break beyond?

USD/CHF has been in something of a textbook downward channel since topping out on April Fool’s day at 0.9472. This peak has retraced from the down trendline from the high in May 2019 and we’ve seen a series of lower highs and lower lows in play in a neat bearish channel. Sellers are winning the day at the moment with the latest pulback being capped by both the 100-day and 200-day SMA around 0.9078/82 which resided near the top of the channel.

Last week’s low at 0.8985 is the first target for the bears which lies around support from last Summer before the February low at 0.8871. As oversold conditions have eased and bearish momentum is picking up, the long-term target is the year-to-date low at 0.8757. Resistance sits outside the channel and above last week’s high at 0.9094 for stops if there is a major reversal in the long-term trend.

EUR/CHF at decision time

This cross isn’t known for its volatility but currently sits at an interesting juncture. The 50% retrace level of the April 2019 to May 2020 move sits at 1.0990 which acted as resistance at the back end of last week. With buyers rebuffed, the pair has fallen to the 100-day SMA which is holding up any more bearish price action so far at 1.0938. If sellers win out and beat next support at last week’s low at 1.0926, then 1.09 may quickly come into view with December’s high at 1.0892.

On the flip side, further confidence in the global recovery will see EUR/CHF pushing higher and challenging the retracement level just below 1.10. Indeed, if EUR/USD stays supported then the bulls could push the pair to 1.11 and near this year’s highs.