Bottom line: USDCHF medium term structure remains bearish against 0.9900 levels. Bears might be back in control after testing 0.9800 resistance and could be targeting lower towards 0.9450 levels at least.
Fundamental Outlook:
USDCHF might come under pressure today as the US ISM Manufacturing PMI is expected to print 36.9 versus 49.1 earlier. It is trading lower around 0.9650 as we write this article and could come under further pressure during the NY Session.
Dow Jones and SPX500 closed around 1% lower yesterday. Fears of a potential trade war between US and China has brought Global Indices under pressure again as they remain vulnerable for another huge selloff. A trade war amidst COVID-19 crisis can only worsen Global Economic Outlook which is already facing deep recession according to IMF reports (Global GDP to shrink by around 3% in 2020).
Technical Analysis:
USDCHF still remains in control of bears as it fails to break above 0.9800 levels for the second time. Higher probability remains for a drop towards 0.9450 levels, before deciding further direction. We are expecting for a counter trend drop to complete around 0.9450/60, before the rally could resume.
USDCHF had earlier rallied from 0.9150 through 0.9900 levels breaking above immediate resistance around 0.9845 levels. A corrective drop was expected thereafter and prices did drop sharply toward the fibonacci 0.50 retracement around 0.9500/10 levels. If prices test 0.9500 levels again, it would satisfy minimum requirement for the corrective drop.
Also note that fibonacci 0.618 of entire rally between 0.9150 and 0.9900 is seen around 0.9455 levels. Probabilities for a bullish reversal remains high if prices manage to reach there. Only a drop below 0.9320/30 levels would nullify the above bullish scenario.
Most traders might be preparing to initiate fresh long positions around 0.9450/60 levels, with a protective stop around 0.9150 and projected targets towards 1.0237 respectively.
Prepared by
Harsh Japee, Technical Analyst.
USDCHF Chart
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