USDCHF Short-Term Retracement Forex Setup – Nov 5, 2014

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USDCHF Short-Term Retracement Forex Setup - Nov 5, 2014

USDCHF Short-Term Retracement Forex Setup - Nov 5, 2014

USDCHF has broken above the resistance at the .9550 minor psychological level and looks prime for a retracement forex setup to the Fibonacci levels marked on the 1-hour time frame. The pair appears to be finding support at the 38.2% level, although stochastic hasn’t moved up from the oversold area yet.

This suggests that a deeper retracement to the 50% Fib might be in order, as this lines up with the 200 SMA. It also coincides with the broken resistance area and might act as support. MACD is also starting to turn higher, indicating a potential pickup in buying momentum and a long forex setup on a bounce.

A rally could take the pair up to the previous highs near the .9700 major psychological mark and possibly on to new ones. On the other hand, a break below the 200 SMA and 61.8% Fib might be a sign that a downtrend is in order and that a test of the previous lows around .9400 is possible.

Forex Setup Details

Going long at .9550 with a stop below the .9500 handle and a target of .9700 could yield a high return on risk for a day trade. Aiming for new highs could improve the return ratio but it would be prudent to adjust the stop to entry once price tests the previous highs.

Event risks for this forex setup include the release of a couple of US top-tier reports, namely the ADP non-farm employment change figure and the ISM non-manufacturing PMI. Strong data could set the tone for an upbeat NFP release on Friday, which could lead to early dollar rallies, with traders pricing in positive expectations for the jobs release.

Due from Switzerland today is its CPI reading, which might mark a 0.1% decline in price levels, following the previous month’s 0.1% gain. Bear in mind that deflation is a concern in Switzerland and a weak CPI reading might be a catalyst for a USDCHF long forex setup.

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.