USD/CHF: Friday’s Piercing Candle May Target .9800 Next

<p>Autumn (in the Northern Hemisphere) doesn’t officially start until Wednesday, but based on today’s lackluster trading, traders are already feeling the end-of-summer blues. Global equities […]</p>

Autumn (in the Northern Hemisphere) doesn’t officially start until Wednesday, but based on today’s lackluster trading, traders are already feeling the end-of-summer blues. Global equities are edging higher in relatively quiet trade, global bonds are mixed, and the greenback is ticking up modestly, extending the bullish momentum from Friday’s big bullish reversal.

Of all the major currency pairs, USD/CHF is arguably one of the most interesting. The unit fell dramatically Friday morning, hitting the 50% Fibonacci retracement at .9540 before reversing to surge all the way back above the 50-day MA (.9660), where it finished the week. The big intraday reversal created a clear Piercing Candle* on the daily chart, showing a shift from selling to buying pressure and hinting at a possible continuation higher this week.

For its part, the daily Slow Stochastics indicator is showing signs of turning higher; previous bottoms in this indicator have marked rallies in USD/CHF, though the last three bottoms came from oversold territory first. Despite this difference, a confirmed cross above the signal line (%D) in the Slow Stochastics would certainly be a constructive sign.

At this point, more upside is favored in USD/CHF, with bulls potentially looking to drive the pair back up toward its six-week high at .9820 or even the six-month high near .9900. On the other hand, a reversal back below the 50-day MA at .9660 would erase the bullish bias and point to more consolidation in the near term.

Key fundamental data / news that may impact USD/CHF this week (all times GMT):

Today: US Existing Home Sales (14:00)

Tuesday: Swiss Trade Balance (6:00)

Wednesday: No significant data

Thursday: US Durable Goods Orders (12:30), US New Home Sales (14:00), Fed Chair Yellen Speaks (21:00)

Friday: US Final Q2 GDP (12:30)

*A Piercing Candle is formed when a candle trades below the previous candle’s low, but buyers step in and push rates up to close in the upper half of the previous candle’s range. It suggests a potential bullish trend reversal.

CHFDAILY9-21-2015 8-52-03 AMSource: City Index

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