John J Hardy
Surprise ISM non-manufacturing data set Friday’s US employment report up to be more interesting than usual, says Saxo Bank’s head of FX strategy John Hardy.
Day trade
Trade view / 25 May 2016 at 7:01 GMT

Warning signs highlight USDCHF correction due

Analyst / PIA First
United Kingdom

The most important factor today looks like the USD index. We are close to the 261.8% extension level of 95.75 (from 91.88-93.36). Intraday oscillators are starting to show bearish divergence. We do have solid support at 95.19 and could see a corrective bounce from there so there could be mixed trading today (selling rallies at 95.76 or buying dips at 95.18 – current price 95.55).

Looking at the diary, there is no real catalyst today unless a US Federal Reserve speaker reverses the rate-hike rhetoric. I think it would more likely be tomorrow's US Durable Goods release if this USD bull run is going to end, and correct lower (before the next wave higher begins).

The monthly USDCHF chart highlights the pair holding between two trendlines, an area that has held for the last seven months. What we are likely to get in May is a bullish Outside Bar or an acute monthly reversal candle offering a strong upside bias going forward.

Monthly - Bullish Outside Bar
Source: Saxo Bank

The daily chart highlights a wedge breakout with the retest completed on May 12. Targets for the wedge are 1.0091 and possibly 1.0255 (we prefer the first). These two factors keep the medium-term bias focused on the upside.

Daily Wedge Breakout
Source: Saxo Bank

However, the intraday chart highlights a 161.8% extension level located at 0.9958 with bearish divergence seen on the four-hour chart. Although the anticipated move lower is corrective, it does offer ample risk/reward selling into rallies.

Four-hour chart - 161.8% extension and bearish divergence
 Source: Saxo Bank

Management and risk description


Entry: sell at 0.9955.

Stop: 0.9985.

Target: 0.9885 and 0.9850.

Time horizon: targets to be met within 5 sessions.

— Edited by Martin O'Rourke

Non-independent investment research disclaimer applies. Read more
25 May
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
should note that the 261.8% extension is close to previous high (long term bull trend)
25 May
assi assi
Hi Ian, do you think if we get 1.1095-1.1100 good area to buy EUR
25 May
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
Yes .. I think we will see a correction higher in the next couple of days
26 May
feri feri
thanks a lot
26 May
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
you are welcome


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