USD/CHF Bullish Before and After the SNB-Surprise:
After a bearish correction last week, the USD/CHF has regained its stride this week, rallying from just above 0.9550 to almost 0.9850. The latest part of this rally followed the SNB’s surprise announcement on Thursday, that it deposit rate to -0.25%. The softened the Swiss Franc (CHF) across the board. EUR/CHF for example rallied away from the 1.20 SNB floor. As for the USD/CHF, it simply rallied to a new high on the year.
Bulliish Continuation Theme: From the daily chart, we can see a persistent bullish market in continuation mode as the USD/CAD continues to make higher highs and higher lows while remaining above the 200-, 100-, and 50-day SMAs, while the daily RSI held above 40, and even above 50. This has been a theme since October – consolidation in a flag like pattern, then a bullish breakout.
Now, let’s zoom even further to the weekly chart.
Let’s go back to 2011, when USD/CHf sharply rebounded from a 0.7066 low. It eventually rallied to 0.9972 in 2012 and then entered a 2.5-year-and-counting consolidation period, which we are still in at the end of the 2014.
There can be some arguments from a technical perspective that USD/CHF is entering a bull market in the long-term.
1) Price is holding above the 200-, 100-, and 50-weekly SMAs.
2) The RSI has tagged 80, which shows bullish momentum. It is now given us what’s called a positive-reversal signal. According to Andrew Cardwell, the RSI guru, this occurs after a bullish push, then the RSI has a new low, but price is still making a higher low, suggesting another push to the upside. This is more of a short to medium-term bullish signal (so it is a precursor to the long-term bullish outlook argument).
3) The 2.5-year consolidation might be over as price broke above a falling channel consolidation pattern.
4) This week’s price action is forming bullish engulfing candle, or at least an outside bar, which suggests bullish continuation in the short to medium-term.
With these technical conditions, USD/CHF looks at least poised to test the 0.9972, 2012-high, with risk of breaking it and testing the 1.00 psychological level. A break above 1.10, then gives more weight to the case for bullish market in the long-term.
The fundamental factors, with the SNB cutting rates, and the FOMC planning to raise rates, surely support a bullish outlook at least in the short to medium-term as well.
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