The Swissie Rally Isn’t Done Just Yet

Key Points:

  • Gains should continue to be seen this week
  • The 0.9818 mark is likely to be our turning point
  • Technicals are largely driving prices

The swissie has been recovering nicely over the past week or so but it’s been running into some resistance which could mean that it is now poised to reverse earlier than previously expected. What’s more, now that the FOMC is out of the way, we can’t rely on rate hike speculation to fuel the uptrend which leaves us looking to the technicals for answers.

Luckily for us, despite some readings being in disagreement, the technical bias remains rather bullish overall. For one thing, the pair continues to distance itself from the long-term ascending trend line – thereby regressing to the central tendency of the broader channel. Moreover, the ADX has moved out of strong-trend territory which suggests that the recent downtrend has run out of steam and that upside risks are increasing at a decent clip.

Swissy Rally Chart

Furthermore, the parabolic SAR is actually suggesting that the medium-term downtrend is entirely done and dusted. Specifically, it is currently well below price action which would generally mean that we are moving into a bullish phase for the USD/CHF, at least in the near to medium-term. Nevertheless, we can’t ignore the fact that resistance is beginning to intensify which may prevent the pair from extending all the way back to the 0.9818 handle – as was originally forecasted.

As shown, the 0.9769 mark is proving difficult to break through which is due, in part, to the historical reversal zone around this price. Additionally, stochastics have trended towards overbought which will be giving the bulls some pause for thought as they attempt to bid the swissie higher this week. It is also worth mentioning that the EMA bias remains rather bearish as well which could add to the headwinds working against the pair.

Nevertheless, on the balance of things, our view is that the pair continues to extend gains this week until it reaches that 0.9818 mark. At this price, a more robust reversal point will likely encourage a slip to the downside, especially given that it coincides with the 38.2% Fibonacci level. Additionally, the 100 day EMA and the stochastics will be putting significant pressure on the swissie at this price which will most likely necessitate a period of cooling-off for the pair.

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