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Descending Triangle Pattern in the USD/CHF – Is It Going to Break Lower?

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During Monday’s Asian trading hours, the USD/JPY currency pair failed to stop its overnight bearish moves and caught further offers below the 0.9100 level. However, the reason for the bearish tone around the currency pair could be associated with the broad-based U.S. dollar weakness, triggered by the risk-on market mood, which tends to weaken the safe-haven U.S. dollar. Hence, optimism was supported by optimism over a potential vaccine/treatment for the highly infectious coronavirus. In that way, the positive tone around the equity market also weakened the safe-haven Swiss franc and became the factor that cap further downside momentum for the USD/CHF currency pair. Currently, the USD/CHF currency pair is currently trading at 0.9099 and consolidating in the range between 0.9095 – 0.9117.

While discussing the positive side of the story, the renewed optimism over a possible vaccine for the highly infectious coronavirus disease boosted the market risk tone. However, the hopes of the vaccine were boosted after Gilead Sciences received US FDA approval for its antiviral therapy to treat the highly contagious coronavirus disease. Elsewhere, the reasons for the risk-on market trading sentiment could also be attributed to rising expectations of further U.S. stimulus package. These hopes were fueled by the positive remarks of President Donald Trump and House of Representatives Speaker Nancy Pelosi, which eventually raised hopes for the measures to be passed before the election. 

Despite the worries over the coronavirus pandemic’s resurgence, the renewed optimism over a possible vaccine for the highly infectious coronavirus disease boosted the market risk tone. These hopes were boosted after reports suggesting that the vaccinations against coronavirus disease in America may start in 3-weeks, as the FDA will approve drugmaker Pfizer and German partner BioNTech’s experimental candidate in mid-December. Simultaneously, the U.K. is expected to give a green signal to Pfizer’s vaccine this week. This, in turn, boosted hopes for a global economic recovery in 2021. Thus, the risk-on market mood tends to undermine the safe-haven Swiss franc, which becomes the key factor that lends some support to the currency pair to ease the intraday bearish pressure surrounding the USD/CHF currency pair.

As a result of the upbeat market sentiment, the broad-based U.S. dollar failed to gain any bullish traction and edged lower on the day as doubts persist over the global economic recovery from COVID-19. Besides this, the risk-on market sentiment, backed by the optimism over a potential vaccine for the highly contagious coronavirus disease, also played its major role in undermining the safe-haven U.S. dollar. However, the losses in the U.S. dollar becomes the key factor that kept the currency pair lower. Meantime, the U.S. Dollar Index, which tracks the greenback against a bucket of other currencies, was down at 92.707.

Across the ocean, the optimism around the equity market was rather unaffected by the intensifying market worries regarding the continuous surge in new coronavirus cases in Europe and the United States, which keep fueling the doubts over the global economic recovery through imposing new lockdown restrictions on economic and social activity. Apart from this, the long-lasting inability to pass the U.S. fiscal package and the jitters over the Sino-US also capped upside momentum for the trading sentiment.

Looking ahead, the market traders will keep their eyes on U.S. Markit Manufacturing PMIs, which are scheduled to release later in the day. All in all, the updates surrounding the Brexit, virus, and U.S. stimulus package will not lose their importance. 

Daily Support and Resistance

S1 0.9045

S2 0.9077

S3 0.9094

Pivot Point 0.9109

R1 0.9125

R2 0.9141

R3 0.9172

The USD/CHF is trading over 0.9093 level, testing the support level of 0.9093 for the fourth time now. Typically the descending triangle pattern breaks on the lower side, and that’s what we are expecting today. If this happens, we may see USD/CHF pair falling towards the 0.9033 area. Checkout a trade plan below…

Entry Price – Sell 0.90995

Stop Loss – 0.91395

Take Profit – 0.90595

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

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