The CHFJPY has rallied over the past several trading weeks as visible in this W1 chart. This currency pair has formed a rising wedge formation which is a bearish chart pattern. The CHFJPY now trades at the top of it bearish formation and we expect it to reverse and start a correction which should cause a breakdown of its current pattern and down to its ascending 50 DMA.
MACD has not confirmed the rally and formed a negative divergence which is a bearish signal. The histogram has set a lower high and has now touched its descending moving average. RSI is trading in overbought territory and has formed a negative divergence as well. A breakdown should further fuel the correction.
We recommend a short position at 109.00 which would be an add-on to our two previous short positions we which took on August 15th and September 11th at 105.25 and 107.50 respectively. We also recommend a stop buy order at 109.75with a take profit target of 111.00 in order to hedge our short positions.
Traders who wish to exit this trade at a loss are advised to place their stop loss level at 111.00. We will not use a stop loss order and execute this trade as recommended. Place your take profit target for all open short positions at 107.00.
Here are the reasons why we call the CHFJPY currency pair lower
- The CHFJPY currency pair has formed a rising wedge formation which is a bearish chart pattern and currently trades at the top of its formation
- MACD has formed a negative divergence which is a bearish sign and does not confirm the rally
- RSI is trading in overbought territory and has formed a negative divergence as well
- Profit taking after a strong rally in order to realize trading profits
- New short positions by institutional swing traders