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Just yesterday we looked at the USDCHF as it was trading below channel resistance. We discussed the same pattern last Wednesday when I asked the question of whether or not it was a bullish continuation pattern.
It seems we now have our answer. Tuesday’s 0.9869 close was more than enough to clear the confluence of resistance at 0.9850.
From here things are pretty straightforward. As long as the 0.9850 region holds as support on a daily closing basis (5 pm EST), I’ll maintain a bullish bias.
One thing I mentioned yesterday is that my longer-term target is 1.0330. That probably seems lofty so allow me to explain.
From the weekly time frame, you can see the 900 pip range that has been in place since 2015.
I mentioned this back on September 28 as the pair was coming off a triple bottom at 0.9435. It was the basis for my somewhat long bias at the time, and it has only strengthened with time.
Now, here’s why I think the recent channel break could expose a target that’s 450 pips from the current price.
Notice how the flagpole of the structure that broke down yesterday measures 620 pips. If we take that same distance and measure from Friday’s low at 0.9734, we get a price of 1.0354, just 24 pips above the multi-year range top.
Coincidence?
Perhaps, but I’ve seen this before. There’s usually some congruence that accompanies a legitimate objective, regardless of the pattern in question.
Keep in mind, however, that this is my best judgment based on the recent price action. There are no guarantees that the pair will garner enough attention from buyers to revisit the objective at 1.0330 or even reach 0.9940.
For now, all eyes are on the 0.9850 area holding as new support. If it does, there isn’t much stopping a retest of the 0.9940 handle followed by the October and November high at 1.0038.
Alternatively, a daily close back below 0.9850 would negate the bullish scenario described above. Keep in mind that the U.S. ADP employment figure is due out on Wednesday at 8:15 am EST followed by Friday’s non-farm payroll at 8:30 am EST.
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