I said yesterday that I found the way price was sticking to the top of the ascending channel on CHF/JPY’s 1-hour forex chart to be rather disconcerting since it could potentially mean that forex traders who were bullish on the pair were preparing for a possible topside breakout. Well, it turns out my concerns were unfounded and a breakout was not forthcoming, so congratulations to those who found a trade since the pair moved down for around 200 pips since we last saw it. For today’s play, we’re waiting for the pair to reach the bottom of the channel and/or find support before moving back up again. Presently, price is already past the mid-channel area and stochastic is already in oversold territory, so some bulls may be enticed to start nibbling already.
After a topside breakout from a descending channel has been respected since the middle of September, price began moving higher while encountering sellers along the way. In the process, a rising trend line seems to have formed, and the pair is currently testing the said trend line. The big question now is whether or not price will continue respecting the trend line or break past it and continue the downtrend. Looking at our technical indicators, the moving averages have just crossed-over into uptrend mode, although neither SMA is acting as dynamic support. Stochastic also just recently left the oversold region, but it’s pointing back down again. Overall, price is just as likely to go up as it is to go down, so be careful.
CAD/CHF has been moving ever lower while bouncing up and down inside a descending channel. As I always say, the most conservative way to trade a descending channel is to look for resistance near the top of the channel, and that’s where price happens to be at the moment. Our technical indicators are also lookin’ good since the moving averages are clearly indicating a downtrend while stochastic has just recently reached overbought territory, so forex traders who are bullish on the pair may become exhausted soon enough. The only thing that worries me is that the bullish momentum is rather strong, so there’s a good chance that price will temporarily breach the top of the channel, or worse, stage an upside breakout. In any case, just make sure to practice proper risk management should you find a trade based on this or any of the other charts, okay?
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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