In this article I will explain why the USDCHF is poised to head lower and why the background is so important to understand on a price chart.
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Over the last few days we have seen the USDCHF change polarity. What has caused this change in polarity? On the 4th of August on the 1-hour char we witnessed a couple of ultra-high volume up bars. The first bar had the VSA indicator SOW 26 Supply Coming In. This bar was not confirmed and it was followed by an ultra-high volume up bar.
With ultra-high volume up bars this is a sign of weakness. The very next bar was a down bar on ultra-high volume and it was larger than the two previous bars. This knocked the prices sideways until the highs were tested again. Once again we witness supply coming in and this ultimately pushed prices lower.
The down move has generated a trap up move which is a wide spread down bar which closes on the low and this broke through our trigger point, which is the low of the ultra-high volume bar. With a trap up move, it becomes a higher probability trade setup when it’s followed by a No Demand VSA principle. This is what we have on the 1-hour chart. I would expect the price to drop to the area of buying at around 0.9627.
What I look for as well is the currency strength and weakness. At this stage the US Dollar is equal in strength with the Swiss Franc. The price chart is showing us weakness with lower highs apparent in the down trend. The move down may not be apparent until the Euro and London session kick off trading.
Have an excellent trading day
Professional Investor and VSA Expert
Author of Supercharge Your Trading & Investment Account Using Wyckoff / Volume Spread Analysis