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Today we saw USDCHF finally close below neckline support. This is the key level that we’ve been watching to confirm the head and shoulders pattern that’s best seen on the 4 hour chart.
This pattern signals a potential reversal and as such we can look to sell this market on a retest of former neckline support.
Although this is a reversal pattern, it’s important not to get overly bearish. The uptrend from May still looks healthy and trend line support from August 18th could come into play in the coming days. This trend line also intersects with a horizontal support level at .9550.
A close back above former neckline support would represent a false break and would invalidate the short setup.
Note: Friday starts with heavy Euro event risk, including several GDP announcements. This will most likely shake things up for USDCHF. Between these announcements and the G20 meetings, tomorrow will most likely provide an eventful close to the week.
Summary: Look for an opportunity to sell on a retest of former neckline support, now resistance. Key support comes in at .9550.
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