USD/CHF has been following a rising channel with a bullish bias all year, indicating a strong upward trend. However, a break below the base of the channel on May 14 raised concerns about the continuation of the uptrend. The pair is now at a critical juncture, where further weakness could confirm a reversal, while strength could signal a continuation back inside the channel.
On the daily chart, USD/CHF has been moving upwards in a channel since the beginning of the year, showing an uptrend in the medium-term. Despite the recent break below the lower boundary of the channel, the trend remains intact, suggesting that the bullish momentum could continue. However, the short-term outlook is less clear, as the pair fell to a low of 0.8988 on May 16 before rebounding to 0.9117. This recovery may be a “throwback” pattern, indicating a potential further decline below 0.8988 to confirm a reversal of the short-term trend.
In the event of a break below 0.8988, the pair could extend its decline towards the 0.8878 level, where the 100 and 200-day Simple Moving Averages (SMA) converge. On the other hand, a break back inside the channel would reaffirm the bullish uptrend and invalidate the breakdown on May 14. This would require a clear and decisive move back into the channel, potentially leading to a retest of the year’s highs at 0.9225.
Overall, USD/CHF is at a critical point where the technical development will determine the future direction of the pair. Traders and investors should closely monitor the price action to identify key levels and signals that could indicate whether the bullish trend will continue or if a reversal is in store. The next few trading sessions will be crucial in determining whether USD/CHF will stay within the rising channel or break out towards a new trend.
