USDCHF is currently testing a potential resistance zone, which is near the broken support at the .9500 major psychological level. If this area holds as a ceiling, price could turn back down and head to its previous lows around the .9100 major psychological mark.
The resistance area lines up with the 50% Fibonacci retracement level on the latest swing high and low as well, along with a falling trend line connecting the highs from April. However, the short-term EMA on the 4-hour time frame has just crossed up the longer-term EMA, suggesting that further gains could be possible.
Stochastic is already indicating overbought conditions though and may be ready to cross down, which might be enough to bring sellers back to the table. The main event risk for this setup might be the US GDP release on Friday, which could show a downward revision to a -0.9% growth figure.
An even larger economic contraction might be enough to dash hopes of seeing a Fed rate hike this year, which could force the dollar to return its recent wins. On the other hand, a better than expected reading could give the rally an additional boost, possibly pushing USDCHF up to the next resistance around .9800.
By Kate Curtis from Trader’s Way