Key Points:
- Long-term wedge remains in place.
- Current resistance coincides with daily R2 and 61.8% Fibonacci level.
- Stochastics verging on overbought.
The recent upward pressure being felt by the Swissy has once again brought the pair into conflict with the constraints of the long-term falling wedge. This time, it is the upside constraint of the structure which is being challenged and, as a result, we expect to see the Swissy become decidedly more bearish moving forward.
As is shown on the daily chart, a recent surge in USD sentiment has seen the USDCHF push higher during the Tuesday session. As was the case with prior attempts at breaking through the long-term downtrend, the latest run was yet again met with failure. Additionally, when it became clear that the pair lacked the requisite momentum to break free of the wedge, the day’s rally moderated substantially.
Moving ahead, it now appears that the bulls are begrudgingly ready to accept defeat which should mean a reversal will be seen in the coming days. The presence of a daily R2 level around the 0.9789 mark should limit the pair’s ability to remain particularly buoyant, as should the resistance being supplied by the 61.8% Fibonacci retracement. Furthermore, the stochastic oscillator continues to trend towards the overbought mark which will cast doubts on the possibility of a second wind for the bulls.
However, parabolic SAR readings are yet to mirror the bias shown by other technical indicators which could mean that the pair’s slide is more sedate than those seen previously. This being said, a number of important US fundamental results are due out in the second half of the week which could impact the USDCHF heavily. Moreover, the Core Durable Goods Orders and Factory Orders figures are actually expected to come in negative which could provide the spark needed to ignite the forecasted tumble. In addition to the US results, the Swiss CPI data is also scheduled to be posted shortly which could likewise add fuel to any slips seen as the week progresses.
Ultimately, even with the rather substantial market movements seen over the past 24 hours, it seems unlikely that the Swissy is ready to escape from its long-term downtrend just yet. As discussed, the technical bias remains firmly in favour of a reversal and subsequent slip to the lower constraint of the falling wedge structure. Additionally, fundamentals should add momentum to any potential tumbles even if the Parabolic SAR and stochastic oscillator readings moderate bearishness to some extent.