The USD/CHF sliced through its supporting trendline today before rallying back to the line and testing the former support line as resistance. Staying below the spike high at 1.2187 warrants a cautious short-term bearish view. Cautious is emphasized because the rally off of the low looks impulsive and the longer term structure is bullish above 1.2027.
The 240-chart shows the double zigzag from 1.2571 along with the preceding 5 wave rally from 1.1877 to 1.2571. As long as 1.2027 holds, the structure is bullish. A rally through 1.2281 would signal that the next rally leg is underway.
This is a daily chart with the risk reversal rate (1 month 25 delta) below (red line is 10-day average). Not only is this a possible major inverse head and shoulders reversal but the RR rate is in the same area that it was when the USD/CHF put in lows of 1.1920 and 1.1877 in May 2006 and December 2006.
Jamie Saettele is a Technical Currency Analyst for FXCM.
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