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USDCHF’s retreat continues with a new 4-month low recorded
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A bullish pattern could be gradually forming
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Momentum indicators confirm the increasing bearish pressure
USDCHF is trading lower again today, recording its fourth consecutive red candle after failing to break 0.8819. It has actually registered a new 4-month low, a tad below the 0.8699 level. The continued convergence of the 50, 100- and 200-day simple moving averages (SMAs) probably means that the volatility could remain elevated going forward. In this context, we are also seeing the formation of a bullish double bottom pattern. However, a move above the 0.8819 neckline is needed to activate this structure.
In the meantime, the momentum indicators are mostly confirming the current bearish pressure. More specifically, the Average Directional Movement Index (ADX) is edging higher and signaling an intensification of the current bearish trend in USDCHF. Additionally, the RSI is moving lower again, far from its 50-midpoint. More importantly, the stochastic oscillator is at a critical position. Should the stochastic breaks below its moving average again, it would be perceived as a strong bearish signal.
Should the bulls regain confidence, they could try to defend 0.8699 and then potentially set course for the May 4, 2023 low at 0.8819, assuming their successfully surpass the 0.8757 level. Even higher, they could test the resistance set by the busy 0.8906-0.8937 area, which is populated by the 50-, 100- and 200-day SMAs, the February 24, 2012 low and the 23.6% Fibonacci retracement of the October 21, 2022 – July 27, 2023 downtrend.
On the flip side, the bears are probably keen to keep USDCHF below the 0.8699 level and then have a go at pushing it even lower. The 0.8552-0.8569 range, which is defined by the October 27, 2011 and the July 27, 2023 lows, could stand in their way to record a new 2023 low.
To sum up, the current bearish pressure manifesting in USDCHF could have legs if the stochastic oscillator moves below its moving average.
