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The strength meter analysis this week is suggesting that the #SwissFranc is starting to lose strength and that the #JapaneseYen is gaining strength. This could be a sign of a reversal to come to the #CHFJPY currency pair.
I’m taking a look at CHF/JPY as the pair could make a move to the downside soon.
Weekly timeframe
The strength analysis showed the JP Yen gaining strength and the Swiss Franc losing strength recently. When those currencies diverge, we could see a change in the overall trend. As we saw a couple weeks ago, there was a strong bearish candlestick in the market. Typically, this leads to a retracement.
Now, we’re going to draw support and resistance levels to help us identify key areas to watch. There was a lot of price action down around the 118.60 or 118 levels. If this momentum continues, we might see the price go down or pull back up then move to the downside next week.
The weekly timeframe closed bullish last week as the market took a breath from a big fall the week before. The strength meter is showing the Swiss Franc losing strength and the JP Yen gaining. We can begin looking for potential short opportunities now. If the price moves lower, we could see the key support at 118.00 being tested.
But if the strength meter suggests the Swiss Franc losing strength from the JP Yen’s gain, we could see a drop this week.
I’m going to look at the previous week’s high, the low, then the midpoint of the weekly chart. With a Fibonacci tool, I’m going to go from the low to the high. It doesn’t really matter which way you do it because we’re only looking at 50%.
Four-hour timeframe
In the four hour-timeframe, I’ll be watching the highs because the price is close to trading in those levels. There were a couple of rejections but we’ll see the price rally up, break out, then give us a false breakout, and a lower high.
If we get a lower high after the price breaks out, that would be a good sign that the price will break to the downside.
We can draw some resistance and support levels on the four-hour timeframe using last week’s information. The resistance will be last week’s high, and the support will be the 50% retracement and the low.
If we are going to look for short opportunities, we could look for the price to rally towards the weekly highs and form a false breakout pattern.This occurs if the price breaks out then returns and rejects, forming a lower high at the resistance. This will be a strong pattern for a reversal to the price.
I’ll be looking for opportunities around this area if the price continues to break down and goes through the 50% and the candlestick, trade below it then form a lower low, lower high pattern.
Alternatively, we can look for the price to break and trade below the 50% retracement of last week’s range. This will show us that the price will more likely continue to trade lower and that we could look for short opportunities on bearish patterns.
The 50% is quite nice because it found support last week. If the price trades lower, that would be our target for the week. We should also be looking for the price to retest weekly lows.
If the price gives us a false break out of the weekly highs, we could look for a short opportunity. If it also trades below 50%, then we can look for reversal opportunities to continue the downtrend.
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