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Correction looms before the next major drop: USD/CHF technical analysis

By Nathan Batchelor

USD/CHF technical analysis shows that the USD/CHF pair could recover towards the 0.9700 to 0.9800 area before the next major decline. A large bearish reversal pattern points to a possible drop towards the 0.8800 level over the medium-term.

The USD/CHF pair recently fell to its lowest level since September 2018 as investors sold the greenback and flocked to the safety of the Swiss franc currency.

USD/CHF technical analysis shows that the pair could correct higher before the next major downside move transpires.

USD/CHF medium-term price trend

The USD/CHF recently found strong technical support from just above the 0.9500 level as the pair sliced through important technical levels below the 0.9700 handle.

A perfect storm is currently underway in the USD/CHF pair, as traders sell the greenback and move into the safety of the Swiss franc currency.

USD/CHF technical analysis highlights that the recent decline has helped form a head-and-shoulders pattern on the higher time frames with substantial downside potential.

The daily time frame shows that an upside recovery may take place in order to form a final right-hand shoulder to complete the bearish pattern.

Looking at the overall size of the pattern, the USD/CHF pair could fall towards the 0.8800 level over the medium term.

A meaningful upside recovery in the USD/CHF pair could target the 0.9740 to 0.9800 level before the next down move resumes.

USD/CHF short-term price trend

USD/CHF analysis over the short term shows that the pair is bearish while price trades below the 0.9700 resistance level.

Interestingly, bullish MACD price divergence has formed during the latest decline, which hints that a sharp recovery may be on the horizon.

The bullish MACD price divergence extends towards the 0.9800 level, which would mark a correction of some 200 points.

A bullish reversal pattern has formed on the 30-minute time frame, which points to a near-term recovery towards the 0.9700 level.

With this in mind, as long as the 0.9500 level continues to be defended the USD/CHF pair has a high probability of bouncing towards the 0.9700 and 0.9800 levels.

USD/CHF technical summary

USD/CHF analysis shows that the USD/CHF pair recently fell to its lowest level since September 2018. A bullish correction towards the the 0.9700 to 0.9800 area may occur before the next major test of the 0.9500 level.

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