The Canadian dollar had been running wild against some of its counterparts recently and the Swiss franc is no exception. CAD/CHF had reversed from its lows on the 27th of September and since then, it had been trading in a fly mode. Yesterday it finally manged to find its ceiling, for now, at the 0.7700 area. This now becomes an important level to watch, as a break of it could signal further extensions to the upside. But from the short-term perspective, the pair appears quite overbought and seems like it is running out of steam. So, we believe that it could retrace slightly back down before heading higher again. For now, we will examine a short-term downside potential.
If the CAD/CHF decides to test and eventually break the 0.7645 level, marked by the high of the 9th of August, this could be just the first step for further retracement to the downside. That said, in order to get comfortable with lower levels, we would need to see a close below the 0.7625 hurdle, which acted as strong resistance on the 15th and the 19th of August. This way a deeper retracement could be considered. The next potential area of support that could stop the fall could be 0.7570, as it acted as strong resistance the during the last few days of August.
Looking at our oscillators on the 4-hour chart, the RSI has topped just slightly above the 80-zone and now points to the downside. The MACD is also showing signs of topping and is trying to shift below its trigger line. These indicators suggest slowing upside speed and corroborate our view that a corrective setback may be in the works.
On the upside, in order to see CAD/CHF traveling higher, we would wait until the pair closes above the 0.7700 barrier and then we could aim for higher levels like the 0.7740 obstacle, marked by the intraday swing high of the 24th of May. If that doesn’t hold the bulls down, then we could expect the pair to make its way towards the 0.7767 hurdle, which was seen as strong resistance of the 23rd of May.
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