By: Mike Kulej
Following a prolonged down trend, about a month the USD-CHF made the all time low of 0.9462. Since then there were two rallies in this pair and both of them stalled at the same level – the parity.
To be precise, these moves fell just short of parity, but when looking at a long term chart, like this daily graph, the 1.0000 level is an extremely important from both technical and fundamental perspective. Very often round numbers (and it does not get any “rounder” than 1.0000) provide entries and stops for long term positions. Since traders try to outsmart one another, most place their order a little bit above or below a level like this one. This creates a band of increased activity straddling the parity.
The first rally to 0.9970 was only a correction within the downtrend. However, the market failed to make a new low after that, so the second rally to 0.9975 might be seen as an attempt to reverse the major trend. For that, the parity must be broken and confirmed by a daily close above it.
Considering that the second rally had eight consecutive days of higher highs (rather rare event), a pull back of some magnitude should not be surprising. If after that the USD-CHF makes another attempt at the parity, the main trend for this pair could change to bullish.
