The US dollar had rebounded strongly after it suffered a sharp dip against the Swiss franc last 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?
As you can see from the pair’s daily chart above, it appears the it could indeed sustain its recent rally and even move into greater heights. From March until November 2011, the forex pair had formed what seems to be a cup and handle chart pattern (one with a rather sharp or pointed cup) which it broke last December as for my technical analysis. The pair’s upward momentum looks to have slowed a bit, causing it to make a “return move” back to the pattern’s neckline. Presently, the pair is trading right smack at the neckline just above 0.9250. This level could now act as a support and a spring board 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 (could hit the psychological 1.000 level). A break above it could send it higher towards a target of 1.1500 as gauged by projecting the height of the pattern from the point of breakout. On the sour note, a fall below the neckline could send the pair to the 0.9000 marker.