The USDCHF has corrected last week and dropped below its 200 DMA support level as visible in this H4 chart. This currency pair has formed a falling wedge formation and price action is focused on its descending support level. During the correction the 50 DMA as well as 200 DMA completed a bearish cross which may point to future weakness. We call this forex pair higher and expect a rally back into its descending 50 DMA in order to test this level before it could be headed for new lows.
MACD has formed a positive divergence and supports calls for a minor counter-trend rally as momentum improves. RSI has formed a positive divergence as well while it also trades in oversold territory.
We recommend a long position at 0.9300 with a potential second entry level at 0.9225. In addition we advise traders to place a stop sell order at 0.9250.
Traders who wish to exit this trade at a loss are advised to place their stop loss level at 0.9225. We will not use a stop loss order for this trade and will execute the trade as recommended. Place your take profit level at 0.9375.
Here is why we call the USDCHF currency pair higher
- USDCHF has formed a falling wedge formation and price action trades at support
- MACD has formed positive divergence
- RSI has formed positive divergence
- RSI trades in oversold territory
- Short covering