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Market Outlook
Double Top Makes CADCHF Continue Downwards?

Double Top Makes CADCHF Continue Downwards?

25-01-2022 09:42

CADCHF Dropped Sharply through the Neckline Support, Validating the Double-top Formed

The Canadian dollar has tended to weaken against the Swiss Franc over the past few days. This is partly due to the phenomenon of friction between the Canadian government and truck drivers who reject the mandatory vaccine policy. Of course, truck drivers who are one of the stakeholders in the supply chain can disrupt the economy.

Meanwhile, investors tend to be cautious because the Bank of Canada will only announce its interest rate policy tomorrow. Switzerland is also experiencing inflation problems, where last week, the actual inflation data was still below economists' expectations and worse than the previous period, both monthly and annually.

Quick Recap on CADCHF

This pair is indeed one of the favorites for crosspair traders. In addition to providing relatively good volatility, these pairs often form easily recognizable patterns.

Let's dive in a little deeper to see how CAD/CHF fare on multiple timeframes:

CAD/CHF Monthly Technical Analysis

Double Top Makes CADCHF Continue Downwards?
Graph taken from TradingView.

The monthly timeframe of the CADCHF shows a fairly strong bearish sentiment, where the price shows a declining structure and is coupled with the confirmation of the 50 and 100 MA lines which are above the price. Last month's candle closed weakly bullish above support and the January candle has crossed the upper limit of the previous month. But managed to bounce back, held back by the 100 MA line. Let's see how the monthly candle CADCHF closes in the next 6 days.

CAD/CHF Weekly Technical Analysis

Double Top Makes CADCHF Continue Downwards?
Graph taken from TradingView.

On a weekly basis, the pair is ranging with a bearish tendency. The price has rejected the 0.73500 area which makes this area a very strong resistance. Even last week, the CADCHF closed bearish past the lower limit of the previous week's level. Now there is a possibility that the CADCHF will decline towards weekly support.

CAD/CHF Daily Technical Analysis

Double Top Makes CADCHF Continue Downwards?
Graph taken from TradingView.

The daily timeframe shows a double top pattern where the price failed to break through 0.73500 as a strong resistance. In fact, the price has already crossed the support around 0.72700 which is also the neckline of the double top that was formed. This adds confirmation of the dominance of the sellers in this pair.

Trading idea for CAD/CHF

Double Top Makes CADCHF Continue Downwards?
Graph taken from TradingView.

The double top pattern is more clearly seen on H4, where the price which has broken the neckline has also broken the up-trendline that was formed since the end of last December. Now the CADCHF seems ready to retest the confluence area to continue its decline.

Order: Sell Limit
Entry: 0.72720
Stop Loss: 0.73000
Target 1: 0.72400 (50% + BE)
Target 2: 0.71800 (25%)
Target 3: 0.71200 (25%)
Total risk: Max 1-2% Equity (Medium Risk Setup)
Reason: Double top bearish structure, break and retest confluence area and MA 100

ZFX Analyst’s Predictions

Investors are still waiting for the Bank of Canada's interest rate decision to be released tomorrow. There is no confirmation or hint whether the BoC will change the interest rate from 0.25%. The Canadian government, which requires vaccines for the public, has met with strong protests from truck drivers who refuse to vaccinate. The truck drivers' protests certainly disrupted Canada's supply chain and hampered the economy in a short time.

Switzerland will also just announce the trade balance tomorrow. However, the consensus expects the result to be lower than the previous period.

However, technically we can identify the pattern that is forming and maybe we can anticipate a retest of the CADCHF to fall further, at least to the weekly support area.

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Risk Warning: The above content is for reference only, and does not represent ZFX’s position. ZFX does not assume any form of loss caused by any trading operations carried out in accordance with this article. Please be firm in your thinking and do the corresponding risk control.

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