USD Strong, but USDCHF Still A Long Term Short

USD Strong, but USDCHF Still A Long Term Short

4 August 2014, 06:29
Zheng He

The US Dollar is definitely very strong.  If we were to look on any chart time frame less than the daily, we see quite a strong uptrend. However, it doesn't look like it is here to last. The USDCHF pair is nevertheless testing a range. We've had two tests in January 2014 and it looks like we are going for a third. Right now, there's not enough data. Keep in mind that when trading price action, support and demand levels or better defined yet, zones, do not necessarily guarantee price turning points. In fact, they are mere critical levels where price has demonstrated considerable action. Whether manipulated by fundamentals or just relatively cheap or expensive, it looks like USDCHF hit a zone. Currently, I'm defining this as a resistance, but it could turn into support. NFP results on Friday August 1st missed expectations, but the US economy is still relatively strong. Still in the positive figures, Friday's lower close could simply be manipulated for the expectations miss. Unemployment worse off by 0.1%, but GDP and consumer confidence outlook still good. However, PA wise, it cuts through a very steeply sloped trend line. Any steep sloped trend lines are bound to major corrections. Rapid buying in a short period of time will follow by a buying slow down. In this case, we may only be seeing the beginning of the sellers. Probability wise, price will reverse in ranges rather than breakout so we take a short bias. 

 Trading Plan: 

$0.8745 is a very extreme price target. It borders the demand zone. It doesn' short now. Thursday's doji and lower close followed by a strong selling is a good indication that the supply is coming. Conservatively speaking, a scale out at $0.9011 is a good bet. Second scale out should be at $0.8862 and finally a complete position close-out at $0.8745. The basis for the $0.9011 scale out is the untested resistance turned support at established May 2014. The $0.8862 scale out marks a confirmed, but weak resistance turned support. The mid-April 2014 resistance turns to support on July 1st, 2014. Finally, a complete close out as it turns into a high probability reversal point. 

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