Swiss Franc Monthly Overview and Weekly Update - March 04/07 close

SWISS FRANC

EURCHF
Monthly Overview - March 2011

Price bounced from the monthly falling wedge and 50% retracement on previous swing low, leaving a pin bar that March candle should confirm for a continuation to the downside. However this is a reversal pattern and another scenario could be a break above the wedge and 61.8% retracement to look for another test of November 2010 highs at around 1.3800/15. On the bearish side, first target would be the lows at 1.2400/20, then the baseline of the wedge and further extension to 1.2040/1.200 before it takes off and reverses the trend.

This pair might be building a Head and Shoulders formation on weekly charts, and closed at 1.2950 after a bullish week and a strong push that brought the price near its 100-day average, after breaking SMA34 and median line of the Bollinger bands. It then did a retest of the broken level on Friday, which ended with the price sitting just above the median line on daily charts. As of today the SMA100 has started to cross down and price lies above all three, with next bullish target at around 1.3150 (today’s daily SMA200). This acceleration and confluence of the moving averages in play can be signaling further upside for the Euro-Yen on the following days, but price is still consolidating around psychological level 1.3000 and a strong break would be needed. If it fails at its attempt to break up, we would be targeting the lower line of the daily symmetrical triangle and middle line of the daily Bollinger bands at 1.2900, after which break we would have two staircase levels at 1.2860 and 1.2800. 

GBPCHF

Monthly Overview - March 2011

A steeper descending channel has been forming a kind of wedge on the monthly charts of this pair, however I would think that it still have some downmove to realize before reversing, and the target area long term would be around 1.3470/1.3100. We have a pin bar for February candle, and price bounced from the lower Bollinger band. Should we break the upper line of this wedge, target is at 1.6200 which is the middle line of the bands, and next resistance area would be near 1.6700/1.7080 at SMA34 and June 2010 highs.

We seem to have a tweezer bottom forming on the weekly charts, after a 61.8% Fibonacci retracement on previous swing high. However we could be thinking of a short-termed break of the rising trend line, as this pair could possibly be building a Head and Shoulders formation (see the rejection of psychological level 1.5200). For a bullish continuation, level 1.5300 with near confluence of SMA34 and SMA100, should be broken and we would be targeting previous highs near 1.5700. As of today, price has been still ranging roughly between 1.5000 and 1.5200 from the beginning of this week, which was also last week’s range, so at the moment there is no clear direction but I would favor a bearish view targeting the next weekly staircase step at 1.4800/1.4780 provided the lows (psychological level 1.4900 and lower daily symmetrical triangle trend line) are broken. Following this, on a medium-term view, we could have a retest of the lows around 1.4380. Finally, next target for the completion of the pattern would be the projection of the weekly’s H&S head, at around 1.4150.

USDCHF

Monthly Overview - March 2011

The Swissie is showing a pronounced falling wedge formation and a reversal and break to the upside should be inminent. We have a hammer candle on the last two consecutive months and a 38% correction to level 1.0180 or at least to parity can be expected soon. A continuation to the downside would reach around 0.8550/0.8280 as the 127% and 138.2% Fibonacci extensions on the actual swing low. 

As seen on the monthly charts, on weekly and daily we also seem to be bottoming out however we must be aware of possible further continuation of the downtrend. We almost reached the bottom line of the weekly descending channel and the same occurred on daily charts, with a week of consolidation just above psychological level 0.9200. Are we done yet or is the US Dollar prepared to stomach a further weakening? If the bearish scenario continues, we could reach below 0.9000 in extension of the actual daily swing low. However I would favor a correction to at least 0.9450/75 in a first step, then a retest of previous highs at 0.9780 and finally a push towards a retest of parity, on a medium-term view.