CAD/CHF hits the watchlist after a solid downside break and ahead of a potential spike in volatility for the Loonie.
What setup for the bears made it to the watchlist, and what bullish pattern is poppin’ up that may draw in short-term bulls?
CAD/CHF 4-Hour Chart by TradingView
Directional biases and volatility conditions in trading are typically driven by fundamentals. If you lack a fundamental-based price outlook for CAD/CHF, it’s time to some digging. Check out the forex calendar and stay updated on daily fundamental news!
Now, if you’ve already done your homework and you have an expectations of the Loonie falling and/or the Swiss franc strengthening, then you’re in luck because there are several technical arguments signaling that technical bears are already jumping in the downtrend and ready to push it lower.
On the 4-hour chart above, we can see CAD/CHF breaking below the major psychological handle of 0.6500 last Tuesday, an area that served as major bullish reversal areas three separate times this year.
But this past Tuesday, FX traders kept the market below 0.6500, eventually pushing it lower to its current market prices around 0.6450.
Technically, this looks like a legit downside support break within a trend, a pattern that could draw in both medium and longer term sellers. If you’re a fundamental bear on the pair, or you expect the Loonie to see bearish vibes off of Canadian inflation data this week, then it’s probably time to move this pair from the watchlist to your strategy and risk management planning bucket.
But don’t start going ham on the sell button just yet! We can see a bullish signal on the chart in the form of higher Stochastic ‘lows’ and lower price ‘lows’, forming a divergence pattern. This may signal to technical traders to buy or take profit on shorts, so there is a non-zero chance a bounce may be in the cards short-term.
If so, there’s a strong technical confluence to watch around the major psychological level of 0.6500, where we can see falling moving averages, falling ‘highs’ trendline, and pivot point > R1 resistance area lining up. If bearish reversal patterns form there, that could be the pattern longer-term players need to start press the downtrend further.
So, that’s the area to watch out for bias confirmation before considering a risk management strategy, but what are your thoughts on CAD/CHF? Are you leaning bullish or bearish?
We love to hear everyone’s ideas so feel free to drop a comment below and share your thoughts!
