The pair declined heavily amidst the increased volatility that spilled over from the equity markets.
NZDCHF is currently on a corrective retrace higher and the question is, how far can this correction run?
The daily chart above carries the simplest visual display of a few highly important support and resistance levels we need to look out for.
Let’s start with the current price action zone. The pair is coming to an initial resistance patch (dotted red trendline) roughly to the 0.5800 handle. This area has been tough to break in the past few trading sessions. Therefore, a break or a failure would determine the next course of short-term play.
Simply by looking at the formation of the higher lows from the past week’s price action, we can expect that the probability of a break higher is greater compared to a fall-back. This potentially signals the end of the correction.
However, we prefer to see a validated break above the resistance to expect further upside momentum. Otherwise, a test on the resistance can lead to a decline, either in the short or medium-term
In the event of a potential break higher, the modest target would be a test of the March 10th high or the 0.5930ish zone. A further break higher would call for a full corrective bounce to test the mid 0.6200 handle.
Contrarily, if we hold to under 0.5800, we should retest the mid 0.5600 handle.
The 2-hour chart carries very current price action. The blue trendlines are forming the current price band and the dotted red trendline is the current support within this channel. While this dotted zone can provide support, we should potentially be breaking higher.
Should we fall back to the current tops and fall under the dotted trendline, we should expect at least another temporary failure to the current highs with price to drift lower testing the 0.5600 handle. This will be in-line with the daily support structure.
The 2-hour chart shows the lower support below the 0.5500 level (descending black trendline). If the price breaks the 0.5600 handle, we can expect to see a decline down to the descending trendline support.
Meanwhile, the ascending trendline on the top side represents a potential target in case we see a valid break of the 0.5800 resistance.