USD/C HF price contracting around the yearly open- breakout to offer near-term guidance

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The Swiss Franc has fallen more than 0.4% against the US Dollar since the start of the week with USD/CHF continuing to contract around the yearly open. These are the updated targets and invalidation levels that matter on the Swissy charts this week. Review this week’s Strategy Webinar for an in-depth breakdown of this trade setup and more.

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USD/CHF Price Chart - Swissy Daily

Technical Outlook: In my latest Swiss Franc Weekly Price Outlook we favored, “fading weakness sub-1.0091,” with, “immediate focus on the 9828/39 support confluence- look for a reaction there.” It’s been nearly seven weeks and price has continued to consolidate around this key level after registering a low at 9694 in late-June.

Daily support rests with the monthly open / 61.8% retracement at 97.90/92 backed by the low-day close / 78.6% retracement at 9749/55 – Ultimately a break / close below 9712/16 would be needed validate a break of the yearly opening-range. Initial resistance stands with the July trendline backed by 9907. A breach above 9965 would be needed to suggest a more significant low was registered last month.

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USD/CHF Price Chart – Swissy 120min

Notes: A closer look at Swissy price action shows USD/CHF trading within the confines of a downward sloping consolidation range off the monthly highs with the weekly opening-range straddling the yearly open at 9839 – look to the break for guidance.

Support rests with the lower parallel backed closely 9790/92 – look for a reaction there IF reached. A break lower exposes the 100% extension at 9773 backed by the uncovered gap at 9760- both regions of interest for downside exhaustion IF reached. A breach above 9873 would be needed to shift the focus higher towards 9901/07 and the 50% retracement of the yearly range at 9965.

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Bottom line: Swissy has continued to narrow into the apex of this formation and the immediate focus is on a break of this range. From a trading standpoint, a break lower would have us targeting a drop towards 9760/73. Ultimately, we’ll favor fading a deeper pullback with a breach / close above 99 needed to fuel the next leg higher in price.

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Siwssy Trader Sentiment - USD/CHF

A summary of IG Client Sentiment shows traders are net-short USD/CHF - the ratio stands at -1.01 (49.7% of traders are long) – neutral reading

Long positions are 1.5% lower than yesterday and 3.4% higher from last week

Short positions are 7.7% higher than yesterday and 6.7% higher from last week

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD / CHF prices may continue to rise. Traders are further net-short than yesterday & last week, and the combination of current positioning and recent changes gives us a stronger USD / CHF-bullish contrarian trading bias from a sentiment standpoint.

See how shifts in USD/CHF retail positioning are impacting trend- Learn more about sentiment!

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- Written by Michael Boutros, Currency Strategist with DailyFX

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