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USD/CHF price analysis: forming a bullish flag pattern

USD/CHF price analysis: There is scope for mild selling pressure. However, with a long-term bullish flag pattern, we prefer to buy into dips

Market highlights from the past week

Thursday, May 14: The dollar index maintained a firm underlying tone on Thursday, but retreated slightly from three-week highs.

Friday, May 15: The US retail sales slump was deeper than expected, reinforcing a major second-quarter GDP contraction.

Monday, May 18: Swiss sight deposits increased to CHF673.5bn in the latest week from CHF669.1bn previously, which indicates that National Bank intervention had slowed slightly but was still running at high levels. The franc was hampered by firmer global risk conditions during the day and volatility surged. 

Tuesday, May 19: The dollar lost ground during much of Tuesday as underlying defensive demand for the US currency faded.

Wednesday, May 20: The Swiss currency was able to resist further selling pressure on Wednesday despite the firm tone in global risk appetite. The euro drifted lower even with a firm tone for the single currency. USD/CHF also registered sharp losses to the 0.9650 area.

USD/CHF price analysis

Let us have a look at the technical viewpoint: 

Monthly: The dip was bought, and the rally sold resulting in little net change by the close in March. Price action is holding within the top half of the March range. The majority of April's initial rally was sold into. 

Weekly: This lack of clear direction has resulted in six inside soldiers being posted on the weekly chart, highlighting indecision. 

USD/CHF price analysisDaily: This consolidation has made a symmetrical triangle on the daily chart. The trend of higher lows is seen at 0.9638. This could be seen as a flag with a bias to break to the upside. The measured move target is 1.0208

USD/CHF price analysis

Intraday four-hour: The 78.6 per cent pullback level from the 0.9588-0.9784 move is seen at 0.9630.

USD/CHF price analysisOutlook: There is scope for mild selling pressure. However, with a long-term bullish flag pattern, we prefer to buy into dips. 

Possible trade setup

Action: Buying at 0.9630

Stop: 0.9580

Targets: 1.0200

Potential return on risk to first target:  R11.4 (reward 570 / risk 50)

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