USD/CHF: To Parity and Beyond?

01/25/2012 6:00 am EST

Focus: FOREX

With a clear support level immediately below current levels, the USD/CHF looks to sustain upside momentum for a run back towards the critical 1.00 level and possibly even higher towards 1.15.

The US dollar (USD) had rebounded strongly after suffering a sharp dip against the Swiss franc (CHF) in August 2011. After reaching a low of 0.7066, the USD/CHF pair is now back above 0.9200.

The question now is will the USD sustain its recent run versus the CHF?

Let’s take a look at a longer-term chart:

chart
Click to Enlarge

As you can see from the pair’s daily chart above, it appears the dollar could indeed sustain its recent rally and even move on to greater highs.

From March until November 2011, the pair had formed what seems to be a cup-and-handle pattern (one with a rather sharp, or pointed cup) which it broke last December. The pair’s upward momentum looks to have slowed a bit, causing it to make a “return move” back to the pattern’s neckline.

See related: The Dominant Chart Pattern of Early 2012

Presently, the pair is trading right smack at the neckline just above 0.9250. This level could now act as a support and a springboard to push it back up.

Notice also that there is a presence of a hidden bullish divergence where the price makes higher lows and the stochastics register lower lows. This plus the fact that it is trading at an oversold condition could indicate a pick-up in prices, at least in the near term.

If indeed the USD’s price picks up against the Swissy, the pair could reach parity again (the psychological 1.000 level). A break above there could send the pair higher towards a target of 1.1500, as gauged by projecting the height of the pattern from the point of breakout. On a more sour note, a fall below the neckline could send the pair to the 0.9000 marker.

By Ron Acoba, contributor, LaidTrades.com

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