Published: July 28th, 2020
Today Gold has reached a strong resistance level at $1980 which has been rejected cleanly. This resistance is confirmed by two Fibonacci retracement levels making it a strong supply zone. First resistance is the 327.2% Fibs applied to the corrective wave down where the middle trendline of the ascending channel was rejected. The second Fibs was applied to the last wave up, where a 50% retracement level was placed to the channel breakout point. It shows that 23.6% Fibs almost precisely corresponds to the 327.2% key resistance at $1980.
We all know that the Swiss Franc is highly correlated to the price of Gold, which means that if XAU goes down, the CHF is also likely to follow that direction. Today we would like to share the analysis on the CHF/JPY currency pair, where a strong downside correction could take place in the coming weeks.
On the Daily chart price has reached the top at 115.68 after which went down and broke below the simple uptrend trendline. This is the very first sign that the selling opportunity might present itself in the nearest future, but only as long as the price remains below 115.68.
The potential correction down could be quite strong, approximately 250 pips from the current price. This is because the key support level is seen at the 50% Fibonacci retracement level, which is 112.17. The support is also confirmed by 200 Simple Moving Average, which goes in line with the Fibonacci level. However, before/if CHF/JPY will start moving down, there is also a possibility that the uptrend trendline will act as the resistance throughout this week. Therefore, consolidation can also be expected.
When CHF/JPY has tested the recent high at 115.68, it has reached and rejected the uptrend trendline, which obviously was acting as the resistance. After the bounce price went down and broke below 50 Exponential Moving Average.
Right now price pulled back slightly and has entered a strong supply zone, where previously pair formed a strong resistance. Fibonacci applied to this upside correction shows that 427.2% Fibs precisely corresponds to the 50% support as per the daily chart.
Today CHF/JPY has rejected cleanly 50 Simple Moving Average on the 1-hour timeframe. Along with the MA, pair rejected the 38.2% Fibonacci retracement level, making 114.70 a very strong resistance. If the price manages to hold this level, the pair should start moving down very consistently where downside support can be reached as soon as next week. Such a forecast is based on the downtrend support trendline, which is crossing with the Fibonacci support on August 2.
If there will be a breakout of the current resistance, CHF/JPY can attempt to re-test the previous level of resistance at 115.27 and even move higher, towards 88.6% Fibonacci retracement level at 115.50. But up until now, the price remains below the 200 EMA, 38.2% Fibs, and the downtrend trendline. Perhaps the best confirmation that the current resistance is being respected, is the daily close below 114.71.
The overall weakness of the Swiss Franc as well as the price of Gold is expected. This should result in multiple CHF related pairs to move against the Swiss Franc. This might not happen immediately and several days of consolidation should also be expected.
As per the Daily, 4-hour, and 1-hour charts, the key support level is seen at 112.19. It is confirmed by two Fibonacci retracement levels and the support downtrend trendline.
Daily break and close above the recently printed high at 115.68 will invalidate the expected forecast on the correctional move to the downside. Upon this scenario, CHF/JPY long term uptrend can continue, and pair can even start rising exponentially for a short period of time.
Support: 114.10, 113.00, 112.20
Resistance: 114.60, 115.27, 115.50, 115.68