Remember what I said yesterday about price sticking to the top of the descending channel on NZD/CHF’s 1-hour forex time frame? Do you also remember what I said about forex traders bullish on the pair gearing up for an upside breakout? Well, looks like I was right. The pair finally broke out of the channel and then went up for about 70-80 pips before stalling.
Price has been closing above the moving averages, so our primary directional bias is for further moves to the upside. But since price found resistance very quickly, there’s also a possibility that the pair will be forced back down into the channel. Stochastic seems to support the latter scenario, though, since it is about to move down from the overbought region.
EUR/CHF has grinding lower while kinda respecting a very messy descending channel. The basic to play a descending channel is to look for resistance near the top of the channel, and lucky us since price is currently trying its best to get past the channel’s ceiling. The moving averages are unclear on the trend, but the stochastic oscillator is already in overbought territory, so forex traders bullish on the pair may be exhausted already.
There is a chance that the pair will successfully break out to the upside, but that’s highly unlikely since the 1.0500 major psychological level that price is trying to push through has seen significant market interest in the past, as highlighted by the rectangle.
If forex chart patterns aren’t your thing, then how about a simple break-and-retest play?
AUD/CHF finally pulled away from the 0.7050 minor psychological level but eventually got repelled when it reached the 0.6960 handle. Now, the bullish momentum has dried up and price is currently consolidating now that it’s back at the 0.7050 level.
So has resistance formed here? Perhaps. The 100 SMA and 200 SMA are already beginning to move wider apart, indicating that the downtrend is still healthy. Stochastic has also reached the overbought zone, so forex traders bearish on the pair may start to nibble soon. Also, the current price level lies between the 61.8% and 50% Fibonacci retracement level.
As usual, make sure to practice proper risk management should you find a trade based on any of these charts.
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To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis. Lucky for us, Pip Diddy fills us in on what we need to know about fundamentals with his Daily Forex Fundamentals.