USDCHF is trading within a tight downward-sloping channel, which seems to be a component of a potential bullish flag pattern following the steep rally to a seven-month high of 0.9374.
The flag structure could be a positive trend continuation signal, backed by the rising shorter-term simple moving averages (SMAs) and the recent bullish cross between the 20- and 200-day SMAs.
That said, the momentum indicators are painting a bleaker picture for the near term as the MACD keeps decelerating below its red signal line and the RSI is weakening towards its 50 neutral mark.
A break above the channel and the 0.9290 barrier could brush downside risks away, shifting the spotlight back to the 0.9355 – 0.9374 resistance region. If the rally gears up, the next stop could be around 0.9450.
On the downside, the 20-day SMA at 0.9200 and the surface of the broken ascending channel may attempt to balance any downside correction if the 23.6% Fibonacci retracement level of the 0.8814 – 0.9374 up leg fails to block the way lower around 0.9228. The 38.2% Fibonacci of 0.9138 and the 200-day SMA may provide another opportunity for a rebound slightly beneath before the focus turns to the 50% Fibonacci of 0.9065.
Briefly, the short-term risk seems to be leaning to the downside in the USDCHF market, but trend signals remain encouraging for now, suggesting that any weakness in the price could be transitory.
