USDCHF FX Trend Reversal Formation – Nov 18, 2014

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USDCHF FX Trend Reversal Formation - Nov 18, 2014

USDCHF FX Trend Reversal Formation - Nov 18, 2014

USDCHF has been on a steady FX trend higher recently yet the pair is now forming a complex double top pattern on its 4-hour time frame. Price has failed in its past two attempts to break past the .9700 levels and may be due to test the neckline of the pattern around .9400 soon.

A break below this support zone could mean an FX trend downwards for the pair, which is currently being weighed down by the Swiss gold initiative. This would require the SNB to hold 20% of its reserves in gold, which would then limit their ability to intervene in the forex market to keep the franc weak.

FX Trend Forecast

If the referendum shows enough support for this proposal, the franc could be in for more gains against its counterparts. A move below .9400 could mean as much as 300 pips in losses, as the double top is of the same height. On the other hand, a bounce from the .9400 mark could mean another test of the .9700 resistance and a potential triple top formation.

As for the US, data has been strong and indicative of a continued hawkish bias for the Fed. After all, the US central bank is moving closer to tightening monetary policy next year, spurred mostly by strong economic data. Data from the US economy has recently disappointed though, but this wasn’t enough to derail the dollar’s climb.

There are no major event catalysts for an FX trend breakdown today, as there are no top-tier releases from Switzerland. US PPI is up for release and weak producer prices might lead to a bit of USDCHF FX trend weakness. The franc might also take its cue from euro zone data, with German and euro zone ZEW economic sentiment figures up for release. Small improvements in confidence are eyed and these might give the franc support as well.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.