USD/CHF Forex Trading Review: Reversal Signals Forming – May 14, 2014

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USD/CHF Forex Trading Review: Reversal Signals Forming - May 14, 2014

USD/CHF Forex Trading Review: Reversal Signals Forming - May 14, 2014

A forex trading review of USD/CHF’s daily chart shows that, while the downtrend has been very strong since September last year, a few early reversal signals can be seen. This indicates that selling pressure is starting to weaken and that the market might be ready to turn.

The chart shows a triple bottom chart pattern right on the .8700-.8750 psychological support levels. The neckline of the formation is located at the .8900 major psychological resistance and USD/CHF is currently testing that barrier.

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Forex Trading Review and Forecast

In terms of monetary policy, the Fed and the SNB are on quite different pages. The Fed is carrying on with its taper plan, supported mostly by a pickup in recent hiring data, while the SNB is intent to maintain its currency peg. A quick forex trading review of past monetary policy decisions shows that the Swiss central bank has intervened a few times in the currency market in order to keep the franc’s value low.

Data from Switzerland has been more or less stable yet the franc has gained support from risk aversion in financial markets. This has prompted SNB officials to reiterate their pledge to keep their local currency weak. On the other hand, US economic reports have been showing a few signs of weakness here and there, with retail sales falling short of expectations for April.

With that, the near term resistance at the .8900 major psychological level might hold for a while, as the summer months could lead to lower liquidity in the currency market. Traders would need to see a strong economic catalyst, most likely from the US economy, before an upside break from the triple bottom neckline takes place.

If so, a long-term rally could last by as much as 200 pips, which is the same height as the triple bottom chart pattern. A selloff could lead to the formation of another bottom right around the .8700 support level.

To contact the reporter of the story: Marco Roemer at marco@forexminute.com