USDCHF is currently testing the resistance of the symmetrical triangle visible on its daily forex chart. Price is also encountering a ceiling around the moving averages, indicating that a selloff might take place.
Stochastic is still moving up, which means that there may be some buying pressure left for a bit of consolidation around the resistance. Similarly, RSI is climbing, which means that buyers are still in control for now. Once these indicators reach the overbought zone, sellers could hop in and start pushing prices down to the triangle support.
The moving averages are treading close together, suggesting the possibility of range-bound movement. However, a downward or upward crossover might offer more clues on which direction a breakout could occur. Note that the chart pattern is around 1,500 pips in height which means that the resulting breakout could be of the same size.
Event risks for this setup include the FOMC minutes release today, which could give more hints on when the Fed might hike interest rates. Keep in mind that this meeting was held prior to the release of the latest NFP report so policymakers might still be feeling a bit more optimistic.
In addition, the risks from the Greek default and China’s stock market tumble haven’t weighed into their discussions then. With that, cautious remarks could underscore views that the Fed can’t afford to tighten in September, possibly leading to a dollar selloff.
Data from Switzerland came in mostly unchanged from previous months, as the jobless rate held steady at 3.3% while foreign currency reserves data didn’t show any signs of intervention.
Other event risks for this setup could be the looming Grexit, as EU leaders and Greek government officials still can’t see eye to eye. Greece has been given a five-day deadline to agree to the bailout proposal or exit the euro zone, leading to more downside pressure on the European currencies.
By Kate Curtis from Trader’s Way