Forex Technical Update
CAD/CHF Daily Chart 11/6/2012 9:05PM EST
Double Bottom: The CAD/CHF had a nice run since August 2011, rallying from a low of 0.7112. Since hitting a 2012-high of 0.9898 in August, the pair has been trading down in a falling channel. Towards the end of October, CAD/CHF stalled finding a couple of support pivots at 0.9272 and 0.9291. You can argue that this formed a double bottom. The second lower low was accompanied by a higher low in the RSI and therefore, its also a bullish divergence. Both of these technical setups suggest a correction, which has already taken place.
Trendline: The question now is whether this correction can extend higher to a more significant reversal. If you consider going in the direction of the trend since 2011, this could also develop into a bullish continuation. However, a couple challenges are at hand. First of all price is being challenged by a declining channel resistance, though it appears price is threatening it already. Another sign of reversal would be the RSI reading pushing back above 60. This reflects loss of bearish momentum exposing at least some higher retracement targets.
Targets: An immediate target is the 50% retracement at 0.9585. If there is a throwback and the market can hold above the 200-day SMA around 0.94, then the bullish reversal scenario is still at hand. 61.8% retracement is at 0.9660. 78.6% retracement is at a previous support/resistnace pivot around 0.9765.
Failure: However, a break back below 0.94 would suggest that even though the decline might be slowing, there is still further bearish intent.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.