The Swiss franc has recently been rejected from parity against the US dollar as the greenback comes under pressure across the board.
A potential drop below the 0.9900 level could be on the horizon for the USD/CHF as the technical outlook for the pair starts to weaken.
USD/CHF medium-term price trend
The USD/CHF pair is reversing sharply lower against the US dollar, following the recent rally towards the 1.0020 resistance level.
Looking at the personality of the USD/CHF, the pair is prone to overextend, both to the upside and the downside. Last weeks move above parity could well be a false technical breakout.
The USD/CHF pair remains technically bullish while trading above the 0.9925 level. Continued weakness under the area could encourage trade to push the pair back towards the 0.9900 level.
It is worth noting that an extremely large head and shoulders pattern is currently looming over the pair on the daily time frame.
Traders should watch for multiple daily price closes under the 0.9900 level as a potential signal that the USD/CHF pair could start to fall towards the neckline of the bearish pattern.
USD/CHF short-term price trend
The short-term trend of the USD/CHF pair should be defined by the 0.9960 to 0.9980 level. Traders should expect this area to act as a natural pivot point this week, due to its technical importance and being the top of end of the USD/CHF pair’s six-week trading range.
Should we see a sustained push above the 0.9980 level, I would expect USD/CHF bulls tocould have another attempt at parity, although price action surrounding the pair is currently bearish.
The USD/CHF pair’s 200-period moving average on the four-hour time frame is another important short-term support level to watch, and is currently located at the 0.9925 level.
Sustained weakness under this key moving average is important as buyers have been successfully defending it since November 21st1.
USD/CHF technical summary
Short-term analysis suggests that selling pressure on the USD/CHF pair is likely to continue to build if a sustained weakness under the 0.9925 level occurs.
Medium-term analysis indicates that once a sustained breakout from the 0.9900 to 0.9980 price range occurs the USD/CHF pair could develop a strong directional trend.