USDCHF is rallying from a decade-long range support in the 0.8800 region.
You can see how the pair has traded between 0.8800 and 1.0200 since 2015, with the lower level materializing in 2011.
Considering that, it’s time to look for long opportunities on bullish reclaims.
What is a reclaim?
It’s a higher time frame close above a critical level that has failed recently.
The daily time frame and higher is the best time frame to confirm a reclaim.
Here’s how that looks:
Step 1: Identify a critical horizontal level with a long history of significance that recently failed to serve as support
Step 2: Wait for one or two daily closes back above the level
Step 3: Watch for a retest of the level as new support for a long opportunity
It’s as simple as that, and the best part is these setups have an incredibly high win rate.
If we apply the above steps to the USDCHF 3-day chart below, we’re currently at step 2.
We have our critical horizontal level at 0.9088, so we’re just waiting to see if bulls can secure one or two daily closes above it.
If so, the price action since the April 4th breakdown becomes a fakeout.
And if you’ve followed me for a while, you know that a fakeout to one side of a level often triggers an extended move in the opposite direction.
Step 3 requires patience for a pullback to 0.9088 as new support.
However, remember that there’s no guarantee we get such a pullback.
But the alternative is to enter at current levels, which is always a bit risky.
So it’s up to you to determine what you’re comfortable with regarding the amount risked and potential drawdown.
In summary, if USDCHF bulls can reclaim the 0.9088 area this week, we could see the pair trend over 300 pips higher to the 0.9420 resistance level.
