NZD/CHF has been in a strong uptrend for the most part of this year, as the pair has been moving inside a rising channel on its 4-hour forex time frame. Price is currently finding it difficult to extend its rallies past the channel resistance at the .7900 major psychological level though, and may be due for a forex reversal.
A quick forex reversal might be in the cards, as a bearish divergence has formed. Stochastic has made lower highs while price made higher highs, indicating that sellers might jump in sooner or later. In this case, NZD/CHF could edge back to the bottom of the channel near the .7600 handle or at least until the middle at .7750.
Shorting at market with a tight stop above the .7900 mark and aiming for the middle of the channel could yield a good return on risk for a swing trade in case the short-term forex reversal does play out.
Forex Reversal Forecast
New Zealand is set to release its quarterly CPI figure this week and might show a disappointment, as commodities and raw materials prices have been slipping in the past few months. This might lead the RBNZ to pause from its tightening moves for fear of weighing further on New Zealand’s product exports.
Meanwhile, the Swiss franc has taken its cue from the euro recently, and the shared currency has been weighed down by banking concerns in Portugal. The country’s second largest bank halted trading of its shares last Thursday amid its inability to make interest payments on its short-term debt securities. This was enough to get traders talking about the euro zone crisis that peaked nearly half a decade ago.
The path of least resistance is still to the upside for this pair, but the upcoming events this week might pave the way for a short-term pullback, at least until the middle of the channel around .7700-.7750.
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