USD/CHF Price Analysis: Bearish continuation pattern, rectangle spotted on hourly charts
A strong pickup in the USD demand assisted USD/CHF to regain traction on Monday.
The risk-off mood underpinned the safe-haven CHF and capped gains for the major.
The formation of a rectangle on hourly charts supports prospects for further losses.
The USD/CHF pair retreated around 15-20 pips from the daily tops and was last seen trading with modest intraday gains, around mid-0.9100s.
Worries about the spread of the highly contagious Delta variant of the coronavirus weighed on investors' sentiment. This was evident from the prevalent risk-off mood, which underpinned the safe-haven Swiss franc and capped the upside for the USD/CHF pair.
That said, expectations that the Fed could be moving closer to tighten its monetary policy sooner than anticipated acted as a tailwind for the US dollar. This, in turn, continued lending some support to the USD/CHF pair and helped limit any meaningful slide.
From a technical perspective, the intraday movement remained confined in Friday’s broader trading range, forming a rectangle on hourly charts. Given the recent sharp pullback, the rectangle might be categorized as a bearish continuation pattern.
Meanwhile, technical indicators on the daily chart have been losing positive traction and add credence to the negative setup. However, RSI on the 4-hour chart remains close to the oversold territory and warrants some caution for aggressive bearish traders.
Hence, it will be prudent to wait for some strong follow-through selling below the 0.9130 region, or the daily swing lows, before positioning for any further depreciating move. The USD/CHF pair might then accelerate the slide towards the 0.9100 mark.
Any subsequent decline is likely to find decent support near the very important 200-day SMA, currently around the 0.9070 region. Failure to defend the mentioned support levels will be seen as a fresh trigger for bearish traders and prompt fresh technical selling.
On the flip side, the 0.9170-75 region might continue to act as immediate strong resistance. This is followed by the 0.9200 round-figure mark, which if cleared should allow the USD/CHF pair to retest three-month tops, around the 0.9270-75 region touched earlier this month.
USD/CHF 1-hour chart
Technical levels to watch
Crypto Market Loses 1.7%; Bitcoin Slumps Further
Ethereum fails to test its first resistance level, major altcoins record decline
Crypto Market Loses 1.7%; Bitcoin Slumps Further
The global crypto market flashed red on Thursday amidst Bitcoin’s (BTC) muted liveliness, losing 1.7 per cent to close at $1.32T as of 9 am IST. The overall market seemed to be in a dormant state, though with a modest increase of 3.3 per cent in its trade volume.
The current slump in BTC prices is attributed to the weak holding patterns prevalent in the market and the record-high inflation in the US. BTC registered a decline of 2.3 per cent to close at $31,950. Earlier, it steadily lost its ground and hovered close to the first support level at $30,900. BTC market trade volume saw an increase of 7 per cent, signalling receding selling pressures from the whales. The current pattern of BTC pricing points to a bearish rectangle, with a possible further downtrend. BTC may soon be testing its significant support level of $30,350. BTC failed to test any resistance levels today.
Ethereum (ETH), the second-largest cryptocurrency by market cap, has failed to test its first resistance level at $2,014 and closed the day at $1,950. If the downturn persists, ETH might go a leg lower to trigger the $1,800 support levels.
Major altcoins, except Binance Coin (BNB) and Stellar (XLM), registered a 2 to 7 per cent decline over the day. BNB and XLM tokens grew by 4 and 5 per cent, respectively.
BTC continued to dominate the market cap with a 45.5 per cent share. The silver lining for BTC lies in miners' return accompanied by on-chain metrics denoting 29 per cent of reclaimed hash power. This development might help BTC to gain momentum in the coming days. BTC continuing to remain resilient above the critical $30,000 levels is key for broader market recovery.
Top Gainers today:
NEM (XEM): 20.3% BakeryToken (BAKE): 13.1% Kusama (KSM): 8.7%
Top Losers today:
Telcoin (TEL): -14.8% THORChain (RUNE): -12.8% Decentraland (MANA): -10.4%
The analysis includes the top 100 coins only as of 9am IST
Source: CoinMarketCap
Crypto News at a Glance:
Paypal, in a bid to make the process of buying cryptocurrencies more flexible, announced that its users will now be able to purchase upto $100,000 worth of crypto assets every week, a five-fold increase in limits. Mobile payments company Square, founded by Jack Dorsey, announced that it will be launching a platform for developers to create non-custodial, permissionless, and decentralized financial services using Bitcoin. France called for an EU-wide cryptocurrency regulation that would lend greater power and direct control to Paris-based European Securities and Markets Authority (ESMA) to regulate the growing crypto market in the region. According to Google Trends, a tool to gauge interest on general topics, the number of searches related to Bitcoin around the world is at a seven-month low. This marks a significant decline from the peak reached in May this year.
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NZD/USD might lead the way lower and a pickup in FX volatility
It is like someone hit the snooze button for FX markets. FX volatility keeps declining, and the search interest in EURUSD might soon be back at the same multi-year lows we saw before the Coronavirus crisis. However, things might change, and the NZDUSD looks to lead the way.
Worldwide Google search interest in EURUSD, last five years
The New Zealand dollar vs the US Dollar has been coiling over the last couple of months in a large bearish descending triangle, and this follows the slide of a smaller pattern that I reported on in June. The pattern in June suggested that NZDUSD could slide by 180 pips, a target that we reached, whilst today’s pattern suggests the NZDUSD might trade lower by 392 pips
Descending Triangle Pattern
For the market to form a descending triangle pattern, the price needs to bounce from a horizontal support level. That level, in the NZDUSD, is the 0.6913 level. The price bounced from or near this level this week, last week, June 18, and March 2021.
The next ingredient is the downward sloping trend line, and we find such a line by connecting the 2021 and May 2021 highs. Subtracting the difference between the May 2021 high and the horizontal support level from last week’s low suggest that the NZDUSD might decline to 0.6522.
Further adding to the bearish bias is that since June 18, the price has formed a bearish rectangle pattern, and this pattern suggests a slide to 0.6735. Therefore, it is likely that both longer-term and shorter-term traders might see value in shorting NZDUSD on a break to last week’s low.
NZDUSD Daily Chart