Summary:
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USDCHF is trading near the support zone at 0.9720
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Breakout below could lead to a decline of 150 pips
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Reversal pattern could be spotted on H4 interwal
Let's start the analysis with D1 interval. The USDCHF currency pair once again reached the support zone marked with the Overbalance structure and the lows from 10 January 2019. The demand side reacted to this area at the end of June, but the market did not manage to reverse back to the upward trend. The price reversed slightly below the round level of 1,0000 and the pair started to decline again. Now the pair is testing the zone at 0.9720. This is another test over the past two months and each subsequent attempt will increase the likelihood of breaking lower. In such a scenario, downward movement could extend. There are around 150 pips to the next important support level that is marked with lows from September 2018 and the 61.8% Fibo level of the whole upward wave started in February 2018.
Source: xStation5
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Open account Try demo Download mobile app Download mobile appTaking a closer look at the same time interval, one can see that the bullish candlestick pattern surfaced yesterday - the Bullish Engulfing. In the case the pair moves higher, one should pay attention to the resistance at 50% Fibo level, which has stopped upward moves at the beginning of July and August. USDCHF is trading lower on the day, but we may have to wait until the daily candlestick closes to draw further conclusions. As long as the pair remains within the support zone (green area on the chart below), there is a chance for an upward correction to occur. Otherwise, the negation of yesterday's candlestick would bring the price below the zone and the pair could accelerate decline.
Source: xStation5
Looking at H4 perspective, USDCHF has been trading in a downward trend since the beginning of this month. The price has tried to bounce off the support zone several times, but today we are once again observing an intraday break lower. From the perspective of classical technical analysis, the inverse head and shoulders structure may be building. Earlier, of course, the price would have to come back above the 0.9720 handle and the neckline (marked with purple colour on the chart below). Nevertheless, one should watch the zone at 50% Fibonacci carefully. A break higher could trigger a bigger upward move but if the current downward sentiment persists, new lows may be quickly reached.
Source: xStation5
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