The USD/CHF pair initially fell on Thursday, but turn things back around to form a hammer. This makes a lot of sense though, because when you look at the charts we are most certainly oversold. Yes I understand that this was a reaction to the Swiss National Bank lifting the currency peg of 1.20 against the Euro, but at the end of the day the US dollar is stronger than most other currencies. Because of this, this pair should fall less than other ones.
I also noticed that we have formed three hammers recently. Because of this, I think that this pair is going to bounce fairly soon. I have two simple lines drawn on this chart, at two large, round numbers. The 0.90 level of course is a round number, just as the 0.95 level is. I think that sooner or later this market is going to bounce and test one of those areas.
US dollar strength still exists
You have to keep in mind that the US dollar strength still exists, all-around Forex world. Yes, the Swiss franc of course is stronger at this point in time, but I do think that we will see a little bit of a rally as traders collect profits. If we get that, I believe that one of the large numbers above will cause enough resistance to put this market back down. In fact, the 0.95 level actually looks more interesting to me than the 0.90 handle. However, we can only take what we get and I believe that even a resistive candle at the 0.90 level is good enough to consider shorting. After all, it would most certainly be with the trend.
The breaking of the lows of course would be a bearish sign as well, but I just don’t see that happening against the US dollar. Even if it did, by suspicion is that you would be better off selling the EUR/CHF pair as the Euro is most certainly a lot softer than the US dollar right now. I am also noticed potential selling opportunities in the AUD/CHF pair, and some of the other higher risk currencies.
