Old Support in CAD-CHF Could Become New Resistance

By: Mike Kulej

The Canadian Dollar – Swiss Franc currency pair broke out of the prolonged trading range it had occupied for a long time. From September 2010 until just last week the price oscillated between 0.9325 and 0.9920, creating many trading opportunities.

CAD-CHF Analysis, March 25, 2011

When volatility exploded after the earthquake in Japan, the price finally broke out from this range. It was the support that gave way and the CAD-CHF swiftly collapsed for two trading session, when it found footing at the 0.9000 level.

The price has been recovering during the last few days, climbing to 0.9325 on Thursday – its past support. This creates a strong possibility for a change of polarity principle, when previous support becomes the new resistance, and vice versa. In this case, the CAD-CHF is facing a resistance at the current price level.

Because the Stochastic Oscillator worked so well during the trading phase, it can still be used for a confirmation of this new resistance. The indicator is in the oversold zone, suggesting that this resistance to stop and perhaps even reverse the rally. All is needed now is an emergence of a bearish candlestick pattern and the CAD-CHF could drop back to 0.9000.