By: Mike Kulej
Recently, the Swiss Franc has benefited greatly from its perceived status of a “safe haven”. This currency has been very strong, reaching an all time high against the Euro and marking major gains in relation to other currencies.
For example, the USD-CHF has fallen from 1.1730 to almost parity during the last few months, which is a big move by all standards. However, last week this pair started to show signs of reversing, or at least consolidating.
It is perhaps best seen on the hourly chart. While the USD-CHF still made a new low, at 1.0060, it failed to reach the parity, an important psychological level. The price attempted few rallies, which became increasingly volatile.
We can see how the ATR shows higher readings during rallies and drops on sell offs. This suggests that buying pressure is building and is reflected in a shape of the price action. It created a possible rounded bottom, or to be precise, two consecutive rounded formations.
Under most circumstances, this chart pattern has a staying power, meaning that the low is not broken easily. For the rounded bottom to be completed, we need to see a breakout above the most recent high of 1.0275, which should result in a rally to about 1.0450.
If this happens, longer-term charts of USD-CHF, like daily, should be checked for evidence of a reversal in the main trend.
