Technical Sentiment: Bearish
Key Takeaways
CAD/CHF has apparently formed a Lower High following a rejection off 0.8400, suggesting traders are going to target the 200-Day Simple Moving Average next.
Technical Analysis
CAD/CHF has fallen from 0.8635 down to 0.8315 since breaking the rising wedge chart pattern on 7th October, crossing below two large moving averages and a huge support level along the way, temporarily stopping once the 38.2% Fibonacci retracement level was reached last Thursday. From a bullish swing configuration of Higher Highs and Higher Lows, CAD/CHF has now completely turned around to a downtrend in two short weeks.
Spot is currently trading at 0.8358 halfway through 20th/10 U.S. trading session. A rejection off of 0.8400, one of the largest pivot zones formed in the 2nd half of 2014, coupled with 100-Day Simple Moving Average, is suggesting that sellers are returning sooner than anticipated as the correction phase winds down and the newly formed trend takes over. While 0.8400 holds as resistance losses are expected to deeper and accelerate in the coming days. Bears will be looking to price in a fresh low, with the support at 0.8234 and the 200-Day Simple Moving average providing the largest attraction point towards the downside.
Free Reports:
Daily stochastic is showing oversold conditions, however this will become irrelevant if price drops below the 38.2% Fibonacci line. A bounce is more likely off the 200-Day SMA, where price has shown a strong tendency to bottom in recent months. Based on the size and speed of the rejection, we will determine bullish targets in a future analysis.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets