USDCHF has been in a steady downtrend on its longer-term time frames but a forex reversal pattern has just formed. A double bottom formation can be seen on its 4-hour forex chart and price seems to be making its way towards the neckline.
A break past the resistance at the .9400 major psychological level could spark an uptrend for USDCHF. The chart pattern is roughly 300 pips in height, which means that the resulting rally could last by the same amount.
Forex Reversal Signal
For now, the short-term exponential moving average is below the long-term EMA, suggesting that the downtrend could stay intact. However, this dynamic resistance level is also in line with the neckline resistance so a break past that area could confirm that a forex reversal is taking place.
Stochastic is moving up, indicating that there could be enough buying pressure to trigger an upside break past the neckline. However, once the oscillator reaches the overbought zone, sellers could hop in a push price back down to the previous lows at the .9100 major psychological level. This could create a triple bottom formation, which is still a valid reversal pattern.
Earlier this week, Switzerland printed a bleak retail sales report and sparked a franc selloff. Consumer spending showed a larger than expected 2.8% slide year-over-year versus the projected 2.0% drop while the previous reading was downgraded to show an even steeper 3.1% decline. Later today, the US is set to print its building permits and housing starts and possibly show some improvements.
The main event risk for this setup is the release of the FOMC minutes tomorrow which might confirm that the Fed is in no rush to hike interest rates. After all, recent reports from the US economy have been disappointing and don’t seem to be temporary as the Fed thinks. Downbeat remarks could keep the USDCHF downtrend going on while reassuring comments could shore up dollar demand.
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