- Analysts lose faith in USD/CHF after failure at major trendline.
- Capitulation back to 0.9940 - 0.9865 zone is now in sight.
- 0.9965 is pivotal level according to Swissquote analysts.
ยฉ OkFoto.it, Adobe Images
Sellers of the USD/CHF rate are on top in their ongoing fight with buyers hoping to see a continued uptrend, according to analysts at broker Sunshine Profits.
Although the bulls have managed to push the exchange rate back above a minor trendline (the brown line) on the chart below, they were unsuccessful in attempts to see it break back above the more senior green trendline. Continued failure at the green trendline indicates a bearish bias for the exchange rate.
Above: USD/CHF rate shown at daily intervals. Source: Sunshine Profits.
"Despite this improvement, currency bulls didnโt manage to take the pair higher, which resulted in a pullback. Earlier today, their opponents triggered further deterioration, which suggests that yesterdayโs pica action was nothing more than a verification of the earlier breakdown under the green line," says Nadia Simmons, an analyst at Sunshine Profits.
A fall of 1.0% to 0.9865 may now be on the cards - the pair is currently trading at 0.9957. Such a drop would bring the exchnage rate down to the 23.6% Fibonnacci retracement of the previous rally from the February lows to the April 2018 highs.
Leonardo Fibonacci was an Italian mathematician who coined the Fibonacci series by observing reproducing rabbits. The Fibonacci retracements 23.6%, 50.0%, 61.8% and 78.6% are derived from the series and describe retracement percentages from major market tops and bottoms.
Retracements are supposed to exert a 'magnetic' effect on prices, which tend to stall and consolidate around Fibonacci levels, sometimes even rebounding or reversing after touching them.
The 23.6% level should offer temporary support as short-term technical traders are likely to target the level to enter trades and scalp the market in the opposite direction of the dominant trend, in the expectation of a bounce.
A similarly bearish analysis is provided by analysts at online bank Swissquote, who turned bearish after the recent rejection by the 0.9965 pivot level and now see the pair falling to support levels at 0.9940 and 0.9925.
"Our preference is for short positions below 0.9965 with targets at 0.9940 & 0.9925 in extension," says Swissquote. "As Long as the resistance at 0.9965 is not surpassed, the risk of the break below 0.9940 remains high."
0.9965 is a key level in their analysis. A break above this would send the pair even higher, potentially as far as parity.
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