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Key Reversal Day in USD/CHF Bodes Bearish

27 February 2009

Following a good recovery from a December low, the market recently marginally overshot a 76.4% level before reversing to produce a Key Reversal Day on 20-Feb. It is, therefore, a good time technically to expect a pullback phase in USD/CHF.

WEEKLY CHART: It seems worth being obsessed by 76.4% retracements in this market. The pullback from near a 76.4% recovery level found support from just above another 76.4% level in late Dec. On the Daily chart resistance has emerged from…a 76.4% level.

DAILY CHART: In the FX Trading Guide we had been thinking that the recent upmove looked tired, backed up by a negative RSI divergence. The 1.1842 76.4% level was briefly pierced, prior to reversal on 20-Feb that produced a Key Reversal Day. We take this to be a bearish sign. First interesting support comes from 1.1278/1.1305/1.1311 (06-Jan high/38.2%/27-Jan low) –our initial target, below which would give s/term bears a boost. Any sellers on upticks have a clear risk level for stops in the 1.1884 high, targeting towards 1.1305 for partial profits. (Note a shorter term 76.4% resistance around 1.1785, which at the time of writing has stayed intact intraday…)

Following on from last week’s Update on GBP/JPY our initial bull trigger of a close above the 137.31 09-Feb high has been given. A further close above the 141.53/70 area has not yet been seen, which would further boost the bullish cause.

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