CAD CHF And USD CHF Full Analysis For May 2012

From one Indice to another and from one FX pair to the Next, there isn’t anything glaringly obvious that I can see for the Week ahead. There are plenty of set-ups, but the risk of failure seems on the high side for most. On that basis I’ve pulled a couple of names from the hat and decided to have a closer look.

USD:CHF and CAD:CHF have both been previous ‘box trade‘ candidates, USD:CHF from early last year and CAD:CHF from the latter part of the year in a set-up that is yet to fully materialise.

CAD CHF

The Daily chart shows 2 recent attempts to regain traction into the ‘box’ that held much of last Year’s trading range. MACD is marginally diverging negatively though this isn’t enough to commit to the short side. However, the likelihood of another strong leg up is very unlikely when combined with overhead resistance and the fact that the green 200 MA has yet to be re-tested from above. My bias on this chart would be for further downside before any new leg up could materialise. An upside break from current price levels is unlikely to get very far before a deeper pull back commences:

The Weekly chart shows good solid resistance at 0.9331 on a candle closing basis. Any Intra-Week strength beyond this level will most probably offer opportunities to position short ahead of a Weekly close below 0.9331 and ultimately a pull back to test that pink 50MA which in my opinion will almost certainly occur before strength is found to take price upwards to test the green 200 MA:

Moving right down to the Hourly chart and price has been oscillating around the 0.9244 resistance level. This is worth watching but I wouldn’t commit to an entry without further confirmation because you could well argue that we have an ascending triangle building towards a break-out beyond the 0.9244 level, but, MACD is not supportive of that so again I don’t feel a breakout here will be sustainable. In retrospect a break-out may actually offer better entries for short positions for those who are more aggressively bearish:

USD:CHF

This pair as you may expect contains a number of similarities to the CAD:CHF pair detailed above.

The Weekly chart appears more bearish than bullish but the price range has been quite tight and we could be forming a Weekly bear flag that could take some Weeks further to fully play out. When price does eventually give way then the pink 50 MA makes for a nice initial downside target. Again, my bias is bearish but I’ve annotated 2 equally likely possibilities on the chart, both giving the same downside target but using different and equally valid  routes to get there:

The Daily chart already has quite a bearish appearance, showing a bullish hammer immediately followed by a bearish engulfing candle hanging from the 50MA.  It’s a set-up that used to get me very interested in the short side, but lately I’ve seen a few similar examples where the bearish engulfing was then followed by a bullish engulfing, so for now I’m just going to keep an eye on it. The fact that this is the 2nd recent downside break of the green 200 MA does suggest the downside is the more likely direction but whilst the chart prints lower highs and higher lows we are effectively in a triangle situation so the key is to remain cautious or use smaller time frames for a clearer picture:

Speaking of smaller timeframes, the 4 Hourly chart looks fairly ugly too. Thus far price has been supported by a weak trend line and it’s probably just a matter of time before this gets broken:

In conclusion I think both CAD:CHF and USD:CHF need to be viewed with an overall bearish bias, but there is room for some upside first and therefore any short positions entered need to be taken in view of price action on shorter timeframes where tighter stops can be run. It must be remembered however that SNB have Vowed to hold the Swiss Franc down against the Euro, which would obviously have a knock on effect with both of the above pairs. I think this adds weight to entering positions based on shorter time frames so that if intervention occurred whilst one was fast asleep in bed, the damage would be very much limited. Finally we must bear in mind that both these pairs have traded fairly tight ranges over recent times and it’s quite possible that this could simply continue, and that could ultimately nullify all of the analysis detailed here.

If I choose to take positions in either of the above pairs I’ll detail it in the comments section below this post, and of course, in the Swing Trades log.

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