Forex Trading Alert: USD/CHF – Strong Bearish Action

By: Nadia Simmons | Wed, Apr 30, 2014
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Forex Trading Alert originally published on Apr 30, 2014, 2:50 PM


 

Earlier today, the U.S. currency moved lower after data showed that U.S. gross domestic product rose at an annual rate of 0.1% in the first quarter, well below expectations for a 1.2% growth. In reaction to this, the greenback declined sharply against the Swiss franc and reached the long-term support line once again. Will it withstand the selling pressure in the following days?

In our opinion, the following forex trading positions are justified - summary:

EUR/USD: none
GBP/USD: none
USD/JPY: none
USD/CAD: none
USD/CHF: none
AUD/USD: short (stop-loss order: 0.9410; initial price target: 0.9060)

Starting today we will limit the number of currencies that we feature in our alerts. We received feedback that our Forex Trading Alerts are too long for many investors to read on a daily basis, so we decided to adjust the way they are constructed. Starting today, we will be providing only the analysis of these currency pairs that are the pair that we have an open position in, those that are particularly interesting on a given day (for instance, because we are very likely to open a position in them shortly) and the pairs that we haven't commented on in 2 weeks (so that you are kept up-to-date even if there's not much to say about a given pair). Today we will feature USD/CHF that has just moved to an important resistance line and the AUD/USD pair that we have a short position in.


USD/CHF


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Quoting our previous Forex Trading Alert:

(...) USD/CHF came back above the lower line of the declining trend channel, invalidating earlier small breakdown. This is a bullish signal, which suggests that we may see further improvement and an increase to the upper line of the declining wedge

As you see on the weekly chart, we noticed such price action as the exchange rate extended gains and almost touched the upside target. Despite the improvement, this strong resistance line successfully stopped further increases (similarly to what we saw at the end of March and also at the beginning of the month) and triggered a decline that took the pair to the lower line of the declining trend channel once again. If this support holds, we may see a corrective upswing to the weekly high and an attempt to break above the upper border of the declining wedge. However, if the lower line of the brown trend channel is broken, USD/CHF will likely test the weekly low of 0.8769.

Once we know the above, let's take a closer look at the daily chart.

USD/CHF Daily Chart
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Yesterday, we wrote the following:

(...) the exchange rate still remains below the very short-term green line and the lower border of the rising trend channel, which together create the nearest resistance zone. From this perspective, it seems that as long as we won't see a breakout above this area, the space for further increases will be limited. Nevertheless, taking into account the current position of the indicators, another attempt to move higher should not surprise us.

Earlier today, USD/CHF increased and almost touched the above-mentioned resistance zone. As you see on the daily chart, it successfully stopped further improvement and the exchange rate declined sharply, approaching yesterday's low. From today's point of view, it seems to us that the recent increase was nothing more than a verification of the breakdown below the very short-term green line and the lower border of the rising trend channel. If this is the case, another attempt to move lower should not surprise us - especially if the pair declines below the lower line of the declining trend channel (marked on the weekly chart).

Very short-term outlook: bearish
Short-term outlook: mixed
MT outlook: bearish
LT outlook: bearish

Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective.


AUD/USD

AUD/USD Chart
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On the weekly chart, we see that AUD/USD still remains in the consolidation range. Therefore, what we wrote in our previous Forex Trading Alert is up-to-date.

(...) From this perspective, it seems that the current decline will accelerate after a breakdown below the thin green support line based on the February and March lows (around 0.9211 at the moment). If this is the case, we may see further deterioration and a drop to around 0.9046 (at this level the size of the downswing corresponds to the height of the consolidation range). Please keep in mind that sell signals generated by the CCI and Stochastic Oscillator remain in place, supporting the bearish case.

Once we know the medium-term situation, let's move on to the daily chart.

AUD/USD Daily Chart
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On the above chart, we see that AUD/USD extended gains and reached a strong resistance zone created by the higher line of the declining trend channel (marked with red) and the upper border of the blue rising trend channel. If this area holds, we will likely see another attempt to move lower. In this case, the initial downside target will be around 0.9239, where the red lower line is. If this support is broken, the exchange rate may drop to the green rising support line based on the Jan.31 and March 12 lows (currently around 0.9209). At this point, it's worth nothing that slightly below this level is the Apr.3 low, which reinforces this support area. However, if the nearest resistance zone is broken, the pair will likely extends gains and the first upside target will be the around 0.9389, where the orange resistance zone (created by the Apr.17 and Apr.22 highs) is.

Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
LT outlook: bearish

Trading position (short-term): Short. Stop-loss order: 0.9410 and initial price target: the lower border of the blue rising trend channel (currently at 0.9060).

Thank you.

 


 

Nadia Simmons

Author: Nadia Simmons

Nadia Simmons
Sunshine Profits.com
Forex & Oil Trading Strategist
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Nadia Simmons

Nadia is a private investor and trader, dealing in currencies, commodities (mainly crude oil), and stocks. Using her background in technical analysis, she spends countless hours identifying market trends, major support and resistance zones, breakouts and failures. In her writing, she presents complex ideas with clarity that enables you to easily understand market changes, and profit on them. Nadia is the person behind Sunshine Profits' 3 premium trading services: Forex Trading Alerts, Oil Trading Alerts Alerts, and Oil Investment Updates.

All essays, research and information found above represent analyses and opinions of Nadia Simmons and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Nadia Simmons and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons's reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Nadia Simmons, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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