The USDCHF has rebounded after last week’s sharp correction, but the buyers still have work to do. The recovery has brought the price back between its 100-hour and 200-hour moving averages, with a rising trendline also cutting through the immediate trading area.
That leaves traders with a clearly defined technical battle. Buyers have recovered some ground, but getting above and staying above the 100-hour moving average is needed to strengthen their case. Sellers need to push back below the 200-hour moving average and the trendline to put the downside back in play.
Buyers recover, but resistance remains
The hourly chart shows a strong advance from the August low, followed by a sharp pullback from the recent high near 0.83821. That decline took the price below the 100-hour moving average and through the rising trendline. The price also traded below the 200-hour moving average before recovering. However, it could not get below the 38.2% of the move up from the August low. That level comes in at 0.82167. The low price on Friday after the jobs report bottomed ahead of that level at 0.8225. Buyers took the price back up and to the 200 hour MA near 0.8302 before settling a touch lower into the close of the trading week.
Today, the price action has seen up and down price action. Although the price was able to get back above its 200 hour moving average, the 100 hour moving average at 0.83206 has been able to hold resistance on 2 separate tries. However the correction off of those highs has so far been able to hold right near the 200 hour moving average 0.83056.
With a pricing between the 100 and 200 hour moving averages, the technical bias is neutral as traders wait for the next shove. If they shove is able to extend above the 100 hour moving average, it opens the door for another run toward the high price reached last week at 0.8382 potentially. Get above and stay above, and the recovery gains credibility. That would open the door for a move back toward the recent high near 0.83821.
Until buyers clear that hurdle, sellers have a level against which they can define and limit their risk.
What sellers need to do
On the downside, the 200-hour moving average at 0.83052 and the nearby rising trendline are the immediate support test. A sustained move back below both would weaken the recovery and give sellers another opportunity to extend the correction. The low today near 0.8274 would be the next target. Break below that and traders would start to focus once again on the 38.2% retracement of the August-to-October advance which comes in at 0.82167. That becomes an important lower target if selling momentum builds. There is distance between immediate support and that retracement, so traders still need to see follow-through after a break above the 200 hour moving average.
A move below support that is quickly rejected would leave sellers with more work to do. Sellers had their shot on the earlier decline. They now need to show they can keep the price below the levels they break.
Trader education: A break needs follow-through
For newer traders, moving through a technical level is only the first step. Staying through it gives the move greater credibility.
The earlier decline broke support, but the recovery brought the price back above the 200-hour moving average. That is why traders cannot assume the first break will keep running.
Above 0.83211 and holding, buyers strengthen their case. Below 0.83052 and the trendline, with follow-through, sellers gain the advantage. Between the averages, wait for the next shove.
These moving average values reflect the October 5 video snapshot and should be refreshed as trading continues.
This article was written by Greg Michalowski at investinglive.com.