(Please click on the chart to enlarge. Chart key: price on 1st pane, Stochastics on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average in orange; 100-period simple moving average in brown; 200-period simple moving average in dark blue; Fibonacci levels in magenta.)
6/08/2011 – USD/CHF (a daily chart of which is shown) as of Wednesday (6/08/2011) continues with a strongly bearish bias in line with the steep downtrend on multiple time frames. From a longer-term basis, price action has seen a clear and well-formed downtrend that has been in place for almost exactly one year since the 1.1730 high in early June 2010. From a shorter-term basis, the pair has been entrenched in a strong leg down since the 0.8945 high in mid-May. The current low that has been hit, which represents an all-time low for the pair at 0.8325, was reached earlier this week. This low also represents the 161.8% Fibonacci extension target of the last major bullish correction within the current downtrend. Having reached this downside target, price action should soon be due for another bullish correction before potentially falling further to continue the strong downtrend. In the event of this bullish correction, the pair could correct back up to the prior extreme low around 0.8550. In the event of a downtrend continuation, a key downside target in uncharted territory resides around the 0.7900 price region, which represents the 261.8% Fibonacci extension of the noted last bullish correction.
James Chen, CTA, CMT
Director of Technical Research and Education