I’ve got not one, but TWO setups for those of you who have been waiting for a Swiss franc breakout! What do you think about these simple but potentially effective FX setups?
First up is a nice and simple triangle breakout play on USD/CHF. The pair is currently oscillating and tightening up around THE major psychological level of 1.000, so if we get the right catalyst, it could be quite a move from here!
One thing to notice is that the 100 SMA is above the 200 SMA, showing that the market has been more up than down since the fourth quarter of 2016. So, the odds are that we’ll get a breakout of the triangle formed around parity to the upside, with the recent swing high around 1.0300 as the likely first resistance area. Don’t count out a downside breakout, though, since those lower “highs” show that sellers haven’t been messing around lately! A break lower might have a more limited potential return, but to 200 to 300 pip move to the major 2016 support area ain’t nothing to sneeze at, nah mean?
It’s pretty much the same situation as USD/CHF above for GBP/CHF, with the pair in hardcore consolidation mode, so much so that the 100 SMA and 200 SMA are virtually indistinguishable at this point.
So, the triangle-consolidation pattern can breakout in either direction at any point, but with the major trend to the downside and the stochastic indicator showing potentially overbought conditions, the better play may be to wait for a downside break.
For you bulls, the break above the lower “highs” and moving averages is a pretty clear sign to test the waters long, with the next potential resistance area not likely until the next major psychological area around 1.3000. This held pretty good as resistance in the second half of 2016 and it was a major buying level after the shocking SNB depegging of EUR/CHF in 2015, so it’s definitely on technical trader’s radar!