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Based on recent price action, it looks like that strong downtrend in USD/CHF could be over. Time for the Greenback to make a big comeback?

USD/CHF Downtrend Break

USD/CHF 4-Hour
USD/CHF 4-Hour

After three months of getting beat down on likely reduced FOMC rate hike expectations, it looks like the U.S. dollar has been gain ground in the last couple of weeks against the majors.

For USD/CHF, we saw major support right around the .9500 handle before a strong USD rally a couple of weeks ago. There wasn’t really a major catalyst for the USD move other than the well know plans of the Fed to reduce their balance sheet or the expect positive U.S. jobs data, so I think it’s more on the rest of the majors seeing weakness in the recent round of inflation data.

Whatever the case may be for the recent strength in the Buck, it broke above the previous area of interest around .9650 that held as support and consolidation in July, and it broke the pattern of lower “highs” marked on the chart above.

I’m thinking this isn’t going to be just a bounce because of the extreme overbought levels of the other majors based on recent COT futures sentiment, so if there is a retest of that broken pattern area, I will go long with a small position for a short-term trade.  Here’s what I’m going to do:

Long half position at .9650, max stop at .9500, initial target at .9850, max target at 1.0000

I’ll be risking only 0.5% of my account on this position and with this framework, my potential gain at max target  comes out to 2.3:1 return-on-risk, but that area around .9850 is a broken previous support area, so I may cut there for a decent 1.33:1 return-on-risk. Stay tuned!

As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

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