Is CAD/CHF Trying to Reverse?
If you look at the CAD/CHF monthly time frame, you can see that the CAD/CHF market has been going down for such a long and strong and a continuous downtrend is formed since November 2007:
Some people always ask whether CAD/CHF is going to reverse or not.
“I don’t know” is the first answer that I have for this question and similar questions because: We Are Traders, Not Fortune Tellers
Nobody knows whether CAD/CHF or another market is going to reverse, keep following the trend or moving sideways. All we can do is following the signals and data.
It seems US economy is moving up after the elections and it is possible that it recovers and grows strongly because the new president is a good and capable businessman and is serious about giving lots of credit to US economy and improving it. He has already started supporting many of the jobs that have been lost and eliminated and has started resuscitating them.
So we expect US economy to start improving and USD to get stronger. I repeat that “we expect”. We can’t predict.
As a result, Canada economy will get better because it is strongly dependent on US economy. So if US economy gets better, Canada economy will do the same.
Therefore, it is possible that CAD/CHF reverses and forms an uptrend.
It has already tested the resistance line as you can see on the monthly chart (above).
It will be a good chance to invest in CAD’s market if it turns around and forms an uptrend, but the market is the first who has to tell us whether it wants to do this or not. You, me, economists and market analysts can be wrong. It is the market that is always right.
Therefore, a good trader and investor must always wait for the market to show him the direction.
In case of CAD/CHF, there are some forming signals that can help us to know whether this market wants to reverse and form an uptrend or not.
1) There is a resistance line (the dashed red line on the below chart) that looks broken and it seems that the market is retesting it now.
2) There is a resistance level at 0.7741 that the market has tried to break above it, but it has failed so far.
If the broken resistance line works as a support and doesn’t allow the price to go down, then the price will try to test the 0.7741 resistance level again. And, if it breaks above this level, it can be a good signal indicating that most probably CAD/CHF wants to go up and form an uptrend.
Even in that case, a reasonable stop loss and exit strategy is a must.
This is how traders should wait for the markets to show them the direction first.