The US dollar fell on Friday as we continue to plunge to the bottom of what has been a major uptrending channel against the Swiss franc. That being said, it looks like we have further to go to the downside, and we have heard very little about concerns coming out of the Swiss National Bank lately complaining about strength in the currency. Because of this, it looks as if the market is starting to get comfortable with the idea of shorting again, and now that we have broken through that major uptrend line, it does suggest that we are going to go looking towards lower levels.
Underneath, the 0.90 level would be an area that I think would attract a lot of attention, if for no other reason than the fact that it is a large, round, psychologically significant figure. That being said, if we do break that level, it is very likely that we could go looking towards the 0.89 handle which is an area that the channel started from. Keep in mind that this pair does not tend to move rapidly, so this is more of a grind just waiting to happen.
To the upside, the previous uptrend line should offer a bit of resistance, extensively the 0.9150 region. The area also has the 200 day EMA sitting just above, so that in and of itself will offer a little bit of resistance. The 50 day EMA is starting to sink lower and threatening to cross below the 200 day EMA in order to form the “death cross.” The market did bounce a little bit towards the end of the session, but we will have to wait and see whether or not we can continue the downward pressure. Because of this, I am going to use the bottom of the candlestick as an entry, meaning that if we break down below it then I would start shorting. The 0.91 level is essentially where that sits, so I think that is a reasonable trigger point. On the other hand, if we were to turn around and break above the 200 day EMA, then it would show a reasonable recovery that would negate any type of negative move over the longer term.
