USDCHF Tests Key Support Below Ichimoku: With USD’s rollercoaster ride on Tuesday, USDCHF tests key support below Ichimoku cloud on the daily chart. Now we have US Q2 GDP coming up on Wednesday with more geopolitical tensions to follow. Let’s take a look at the USD/CHF pair from fundamental, technical, and market sentiment points of view to round up the Invest Diva Diamond Analysis; IDDA.
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1- Technical Points: USDCHF Tests Key Support Below Ichimoku
Daily Time Frame: On Tuesday’s volatility, the USD/CHF both completed a double top chart pattern and confirmed below the Ichimoku cloud before recovering. It hit the all important support level of 0.9450 on the ride too. Taking a quick look at the pair’s historic actions, you’d realize that often times after such volatility and quick recovery, the pair immediately changed direction to the upside. This is still quite possible, which would make the Ichimoku signal a fake alert. However, you must keep in mind that the political conditions are a bit different this time around. With that. Wednesday’s Q2 GDP report could be a game changer.
USDCHF Tests Key Support Below Ichimoku
Monthly Timeframe: On the monthly chart, the USD/CHF pair could be aiming to form a long-term double top. The neckline is precisely on the support level which the pair tested on Tuesday; 0.9450. With the month of August coming to an end, September’s market open level could indicate whether or not this pattern is going to complete. A break below 0.9450 could open doors for further drops towards 0.9232.
USDCHF Tests Key Support Below Ichimoku – Monthly Chart Double Top
2- Fundamental Points
The second point of the IDDA suggests looking at the economic and political developments that could impact the currency pair.
US Side: The USD had a roller coaster ride on Tuesday as the market participants got in a sell-off mode by news of North Korea’s missile launch, but markets soon calmed down and recovered. U.S. markets then moved on to other updates, such as the stronger than expected CB consumer confidence index which rose from 120.0 to 122.9 in August. Today we a have another set of economic data that could shake the markets, starting with German Consumer Price Index at 12 PM GMT, and followed by the US GDP for Q2 at 12:30 PM. Traders are widely expecting the Q2 GDP to get upgraded from 2.6% to 2.7%. If we do see an upgrade, then we’ll likely see the dollar shoot higher against its counterparts.
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3- Market Sentiment
Market sentiment analysis is the 3rd point of the IDDA, taking a contrarian view to crowd sentiment. Retail trader data shows 78.1% of traders are net-long the USDCHF. In fact, traders have remained net-long since Apr 21 when USDCHF traded near 1.00182; price has moved 5.4% lower since then. The percentage of traders net-long is now its highest since Aug 08 when USDCHF traded near 0.9727. The number of traders net-long is 0.7% higher than yesterday and 8.9% higher from last week, while the number of traders net-short is 18.0% lower than yesterday and 23.4% lower from last week.
The fact traders are net-long suggests USDCHF prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USDCHF-bearish contrarian trading bias.
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Let’s Sum it up
Disclaimer (1): As 4th point of the IDDA, you must calculate your risk tolerance before deciding on which trading strategy is suitable for your portfolio. We normally do not recommend trading without three or more confirmation of a specific direction from technical, fundamental and market sentiment points of view.
Disclaimer(2): Forex is one of the HIGHEST risk investing instruments there is. If you don’t have sufficient risk tolerance to trade forex, you can try investing other online securities.
Final thoughts: Based on our IDDA outlook, we have two out of three key IDDA points giving us a bearish bias. However since we do not know what the fundamentals could bring tomorrow, this outlook remains on the high-risk side.
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Combining all points of the IDDA, here are Invest Diva’s calculations for important approximate levels to keep an eye on:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.9232 | 0.9661 | 1.011 |
| 0.9453 | 0.9919 | 1.032 |
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