USDCHF Enters Support Area of Range Going Back to Mid-2015
Cory Mitchell, CMT
In January 2015 the USDCHF collapsed as the CHF flew higher when the Swiss National Bank removed the floor on the EURCHF. That move put in a spike low below 0.84 (the exact price can vary quite significantly by broker).
The price rebounded after that, and since mid-2015 all (three) major lows have occurred between 0.9070 and 0.9190 (rounded). On July 27 and 28, the USDCHF fell into that area, currently trading near 0.9173.
Trading Big Areas
This support area is part of a ranging price structure. Since the area is wide, and false breakouts are highly likely, I prefer to watch to see if the price reverses off this level before considering a breakout trade.
Reversals in this area have been quite sharp on the daily chart. The price falls into the region, and then has a sharp rebound day to the upside. That is one possible reversal method to look for. The price may also consolidate and then break out of the consolidation to the upside, or we may have the false breakout below prior lows, and then a sharp reversal to the uspide.
Once a reversal occurs, a stop loss is placed below the swing low of the potential reversal.
That is what I am watching for now.
Going long has the added bonus of picking up a bit of positive interest each night, since the US interest rate is higher than the CHF interest rate.
Trading a Possible Breakout
The price could break lower, resulting in a breakout of this long-term range. This will provide its own opportunities.
The price is already in a short-term downtrend, so if it plunges through the support area, that downtrend will remain in play. At that point, it becomes a trend trade, looking to enter on pullback once the price consolidates and then breaks back to the downside. This video explains that trade.
Ultimately, this pair is in an interesting area. It implications for the USD index which is hovering in a key area (on the balanced index chart). If the USD keeps falling against other pairs, it will likely keep falling against the CHF. If the USD starts bouncing, we could USD long trades in multiple pairs.
Cory Mitchell, CMT
Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.