Long-term CHF/JPY trend remains very bearish, the current rejection of the 200 MAs on the 4H chart could be the starting point of yet another wave to the downside. It could be a small move down, but only if the 109.86 support is rejected. But, if this level is broken, this could be the confirmation of the much stronger price decline.
Disclaimer: The analysis presented in this article is for educational purposes only and should not be considered as financial advice.
This analysis was done on MetaTrader 4.
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Trade Idea Details:
Key support levels: 109.86, 108.17, 105.63, 103.67
Key resistance levels:110.92, 111.44
Price Action: Looking at the weekly chart, we can see a clear bearish tendency. Fibonacci applied to the 19.06.2016 – 09.07.2017 uptrend shows that price has rejected the 23.6% Fibs at 114.60, back on 09.12.2018 and since then, CHF/JPY never went above this resistance level. In the long term, this suggests a bearish trend which could result in a substantial decline toward some of the Fibs. Most recent price action shows that pair rejected 200 Simple and Exponential Moving Averages along with the 38.2% Fibonacci retracement level. This makes 111.44 a key resistance level.
On the 4-hour chart, CHF/JPY again rejected Simple and Exponential Moving Averages, which suggests the continuation of the downtrend. However, as per the recent price action, we can see that there is minor support located at 109.86, and this could be the nearest target for sellers. When/if this level is broke, with a daily break and close above, the long term downtrend is highly likely to continue.
Finally, on the 1-hour chart, CHF/JPY shows a bearish divergence on the RSI oscillator, which also suggests a potential trend reversal. At the time time, the 200 SMA hasn’t been tested, meaning that there is no strong support rejected on the lower timeframes.
Potential Trade Idea: Currently CHF/JPY is trading near 110.80, where we already see some pull back from the recent high. Perhaps 111.00 psychological level could be the area of interest for the bears, thus providing a good selling opportunity. The first downside target is at 109.86, which would be over 100 pips in the short time span. But if this level gets broken next target would become 108.20, then 105.62 and the final 103.65. The stop-loss should be placed not lower than 111.85, but ideally, an exit signal would be the daily break and close above 111.50.