USD/CHF Price Forecast – Swiss Franc Advances Following Last Week’s Poor Performance

Following last week’s weak poor performance against the U.S. dollar, the franc recovered some on Monday. However, it remains vulnerable to additional depreciation given the recent price structure of the USD/CHF pair.

The USD/CHF pair fell by 0.0011 or 0.11% to close at 0.9818 on Monday as it pulled back following last week’s bullish breakout of an inverse head and shoulders reversal pattern. Resistance was seen around the 50% retracement level following the breakout and a deeper pullback is certainly possible before we see a continuation of the bullish move.

U.S. Bank and Stock Market Holiday

Overall market liquidity was low given that U.S. banks were closed for the President’s Day holiday, as well as stock and bond markets. China’s central bank loosened capital as it will now allow banks to increase the number of non-performing loans on their books.

Higher Targets

Assuming the inverse head and shoulders trend reversal pattern holds up, and there is no evidence so far to indicate that it won’t, short-term weakness can be used to enter a new position or add to an existing position. As long as price stays above the right shoulder at 0.9629, the pattern remains valid.

Minimum potential target calculated from the size of the pattern is approximately 0.9923. That would put the pair close to the downtrend line coming off the April 2019 peak and shows that there is still upside potential for the USD/CHF.

Other targets include the 61.8% Fibonacci retracement at 0.9869, and the 78.6% Fibonacci retracement level at 0.9929. Further, we can combine the pattern target with the 78.6% Fibonacci price to get a relatively tight range from around 0.9923 to 0.9929.

Using Intraday Price Patterns

Given higher potential targets, an intraday price pattern can be used to stalk the USD/CHF for new entries or to add to a long position. It looks like price could soon test support of the neckline or other price levels, such as the Fibonacci retracement levels shown on the enclosed 4-hour chart.

Key support is at the right shoulder of the pattern at 0.9629, but it is quite a ways down to use for a protective stop. A tighter stop to provide better reward to risk can be looked at on the 4-hour chart around the higher swing low at 0.9741.