ForeCastle

Talking Points:

• The USDCHF break has run into the 200 Day Moving Average.
• Potential buyers could enter upon a confirmed break above the 200 Day MA.
• Sentiment has been indecisive all week, not giving us a clear reading.

The 200-Day Simple Moving Average

The 200-Day Simple Moving Average is one of the most popular indicators in the world. When price breaks through a 200 MA on a daily chart, it can often be seen as a topic of conversation on financial news stations, websites and newspapers.
It is primarily used to give traders and investors an overall sense of how strong or weak a currency pair is.

Typically, when a currency pair’s price falls below the 200 Day MA, it is a sign of weakness with a potential for further price decline. And when a currency pair’s price breaks above the 200 Day MA, it is a sign of strength with a potential for further price increases.

Learn Forex: USDCHF vs 200 Day Moving Average




The chart above shows the recent price action surrounding the 200 Day MA. We see a large run up in price breaking through multiple resistance levels until it met this powerful MA line. We have had 6 consecutive days where price has temporarily broke through the 200 Day MA or price has come within 10 pips of the line before retreating lower. So this level is acting as strong resistance.

If price were to remain below the MA, it could propel it lower back into the pair’s price channel. However, a breakout to the upside could add yet another reason to buy the USDCHF. Until we witness a larger price move, we are in a state of limbo.

Indecisive SSI for the USDCHF

Ever since the stalemate caused by the 200 Day Moving Average, sentiment has moved sideways as well. After the first flip in SSI in months, we have since seen 3 flips in the last week alone. This gives some insight on the uncertainty of where the USDCHF could be headed. This can be seen in the graph below where we track both price and SSI indecisiveness.

Learn Forex: Speculative Sentiment Index (SSI) on USDCHF



I am still partial to a long position on the USDCHF, but not as strongly as I was last week. Reducing existing trade size could be a smart money management move, or waiting for a confirmed break of the 200-Day Moving Average before buying.

Good trading!
---Written by Rob Pasche

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