- The CAD/CHF has broken down rather significantly during the trading session on Wednesday, breaking below the 0.68 level.
- The Swiss franc has seen strength around the world, and oil has had a nasty turnaround, setting up the perfect mixture for this move to happen.
- We have been in a downtrend, to begin with, so now it looks like we are ready to continue falling.
- For what it is worth, we had recently formed a couple of shooting stars sitting right at the 50-Day EMA, so it all lines up quite nicely.
If we break down below the 0.6775 level, then it’s likely that we will continue to plunge toward the 0.65 level. The size of the candlestick does suggest that we could get down there, but a little bit of a short-term bounce from this extreme low may happen due to the fact we got here so quickly on Wednesday. After all, we will need to see a bit of follow-through when it comes to momentum, and that might be a little bit difficult. However, if we do break down below the bottom of the lows, then it more likely than not will run a lot of stops, sending this market much lower in a very quick manner.
There is a lot of Negativity
If we do rally from here, we would have to take out the 50-Day EMA in order to look impressive, at least from a bullish perspective. If we were to see that happen, I suspect that you would see the Canadian dollar strengthening around the market, and then perhaps even the Swiss franc losing some strength. That being said, this is a market that certainly looks as if it has made up its mind for a while, so I think follow-through is more likely than not. You could make an argument of an expanding megaphone pattern, but that tends to be a fairly unreliable indicator.
If we were to take out the 50-Day EMA and the 0.70 level, then it’s likely that this pair could go all the way to the 0.72 level, which is where the 200-Day EMA currently resides. Nonetheless, we are in a downtrend, and I think if nothing else, you probably see more of a “fade the rally” attitude then anything else at this point in time. The size candlestick certainly suggests that there is a lot of negativity.
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