The USDCHF has been trading in a range of only about 50 pips since midday Monday.
What does that tell me?
The market is non-trending. Buyers and sellers are battling, but neither side is taking control. Moves higher find sellers. Moves lower find buyers. The price goes back and forth.
The 100- and 200-hour moving averages tell the same story. Those moving averages have converged near 0.8322 and are flattening out. When two moving averages come together like that, it reinforces the lack of directional momentum.
They also give traders a barometer. Stay above the moving averages is more bullish. Stay below is more bearish. However, while the price remains inside the range, those shifts in bias can quickly reverse. We need to see the price get outside the extremes.
The boundaries to watch are:
-
Resistance near 0.83415. A break above that ceiling, followed by the ability to stay above, would give buyers more control.
-
Support near 0.82971. A break below that floor, with follow-through selling, would give sellers more control. Below that, the swing area between 0.82536 and 0.82740 becomes the next downside target.
The important point is that nontrend ultimately transitions to a trend. We do not know exactly when that transition will happen or which direction it will take. But the longer the price stays confined, the more interested I become in the eventual break.
Traders can anticipate a move and a run by identifying the boundaries now and deciding what would confirm a break. A brief move outside the range that snaps back inside is a warning. A break that holds and builds momentum is what traders looking for a trend want to see.
For now, the market is waiting for the next shove. The moving averages help define the bias. The range extremes will help tell us whether that shove has some staying power
This article was written by Greg Michalowski at investinglive.com.