Swiss Franc Monthly Outlook - September 2011

Weekly Update - September 02 close

EUR/CHF

The Swiss Franc has been exhibiting a continued strength over the last two years and August was again a bearish month for the EUR/CHF after July’s strong rejection from the near parity level 1.0070. We might be near to a reversal but there is a long way to the upside at this time, as the pair is still inside a steep falling channel. I see equal possibilities for a push to the next resistance at around 1.2370 and further to a 50% retracement (1.2770) as well as for a revisitation of the lows and reach of parity.

The price reached the upper line of the weekly descending channel and pierced to the middle line of the Bollinger bands, however the pair closed below the trend line and could have another try towards parity or at least a retest of the lows.

On the Daily charts, price closed on Friday below the confluence of the SMA34 and middle line of the bands, performing a 50% retracement on the previous move to the upside, and we could expect a continuation to the next 61.8% level on the short term as first target, and further fall to the lows (1.0080/70) as second target.

GBP/CHF

A similar behaviour can be appreciated for the GBP/CHF, where I would rather expect some consolidation pattern at the present levels for the next months to come, in the area between the 23.6% and 38.2% Fibonacci retracements on the previous swing low. Price is here also roughly at the same distance from the lows and from the next resistance at the top of the steep descending channel near a 61.8% retracement. The following weeks will give us a better view about the reversal possibilities for this pair.

Last week started as a bullish continuation from the beginning of the month, however the price was strongly rejected after reaching the middle line of the weekly Bollinger bands and was unable to attain the upper trend line of the descending channel, ending on an engulfing-bodied candle. I see more probabilities of a further fall, or an accumulation move inside the range delimited by last week’s high and low.

On the Daily charts we can see that the price closed on Friday below the confluence of the SMA34 and middle line of the bands, after almost reaching the SMA100. The pin bar candle might suggest another attempt at breaking the highs for a push in extension to the 138.2% level and SMA200. The overall tone is still strongly bearish though so I would proceed with caution as a reversal is not confirmed yet for this pair.

USD/CHF

Also with a similar price action but a slightly different chart pattern, the Swissie has formed a falling wedge and could soon break the descent. We must wait for September to end to have a confirmation of the August pin bar, however the price came back inside the wider descending channel and we could expect a break to the upside and subsequent move towards the center line (around the 50% retracement of the swing low) as first target (0.9400/0.9600 area). We have a strong resistance area to surpass just above and up to parity before targeting the upper trend line of the channel.

The weekly descending channel was pierced to the upside and price almost reached the middle line of the Bollinger bands, settling for a 38.2% retracement on the last swing low. However, the week was bearish and the price went back inside the channel. Another attempt to break the channel and push towards the 61.8% Fibonacci retracement and SMA34 can be on the cards on a medium term approach.

On the Daily charts, the price closed on Friday above the confluence of the SMA34 and middle line of the bands, which would suggest a potential continuation to the upside for a retest and break of the recent highs, towards the SMA100 level, as a first target, and further continuation to 0.8680/0.8700 for a 138.2% extension on the previous swing high, near the SMA200.