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Bruce Powers
Swiss Franc

U.S. dollar continues to strengthen against the Swiss franc with the USD/CHF pair advancing 0.0024 or 0.25% today to close at 0.9818. Investors looked to lower risk by moving into the dollar, as new cases of the coronavirus outbreak in China grows.

Week Ends Strong

The pair ended the week at an 8-week high, closed near the high of the week’s range, and ended above the 21-week exponential moving average (ema), purple line, for the first time in 11 weeks. These are all bullish indications.


Coronavirus Outbreak Takes a Toll

It was reported today that at least 1,700 health care workers in China have been infected with the coronavirus, and six have died so far. Authorities reported 5,000 new cases on Friday. To date, there are 64,000 confirmed cases of the virus worldwide.

Inverse Head and Shoulders Bottom Breakout

The main technical driver for the USD/CHF pair is the breakout of an inverse head and shoulders reversal pattern that finalized on Thursday. Confirmation of strength was also seen in the 55-day ema as it began to turn up after being down and then flat for more than two months.

The formation of the bottom pattern was accompanied by a bullish divergence with the Relative Strength Index (RSI) momentum indicator.

Watch for further signs of strength when the 21-day ema (purple line) crosses above the longer term 55-day ema. The 21-day has been below the 55-day since early December.

Friday’s advance stopped around the 50% retracement of the prior downtrend. There were no signs of rejection at that price level as the pair closed strong and near the high of the day, which is also the high of the week. Therefore, watch for price to continue to advance towards higher targets.

Higher Price Targets

Once this week’s high at 0.9822 is exceeded with conviction the USD/CNY moves towards the 61.8% Fibonacci retracement zone at 0.9869. That level matches with resistance from a previous support area, and now resistance.

After that, watch the 0.9923 to 0.9939 price zone, consisting of a target derived from measuring the head and shoulders pattern along with the 78.6% Fibonacci retracement, respectively.

Accumulate on Weakness

Given higher targets in the pair, weakness can be used to accumulate. A pullback to test prior resistance as support, around the neckline of the inverse head and should pattern and 55-day ema, now at 0.9765, would not be unusual.

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