During the late morning session in London, the USDCHF experienced an upward movement, reaching a new high. This high price tested the 38.2% retracement level from the previous move down, starting from the June 30 high, as well as an older rising trend line. It's worth noting that both of these levels were breached on Friday but proved to be unsustainable as they failed to hold.
In today's trading, these technical levels attracted interested sellers who were willing to take action (sellers leaned), resulting in a reversal of the USDCHF price movement and a subsequent move lower. The buyers had an opportunity to drive the price higher, but their efforts were unsuccessful, giving way to the emergence of selling pressure at these critical levels.
Currently, the USDCHF has approached the 100-hour and 200-hour Moving Averages (MAs) at 0.86586 and 0.86507, respectively, following the move lower. These MAs have acted as support levels in the past, and on Friday, we saw buyers leaning against them as well. As a result of this support, there has been a modest bounce higher in the price.
Moving forward, the next likely scenarios are as follows:
If the price manages to break above the resistance level formed by the 38.2% retracement level and the old trend line near 0.87297, it indicates that buyers are gaining more control. This breakout could lead to further upward movement in the USDCHF.
Conversely, if the price falls below the 100-hour and 200-hour MAs at 0.86586 and 0.86507, respectively, it suggests that sellers are taking more control. This breakdown could lead to further downward movement in the USDCHF.
If the price remains in between the 38.2%/old trend line resistance and the 100/200-hour MAs support, a battle ensues between the buyers and sellers. In this situation, the price may consolidate and trade within a range until one side gains enough momentum to push the price decisively in their favor.
Traders and investors will closely monitor these key levels to gauge the market sentiment and direction of the USDCHF. A breakout above or below these levels can signal potential trends in the near term.
Chris (Head Trader & Coach)