11-18-06

USDCHF

On Friday, the area of supply I have been mentioning between 1.2500 and 1.2538 stopped the USDCHF rally in it's tracks.
Before that happened, the breakout support area at 1.2485 produced a nice bounce up to the 1.2529 level once the area of supply at 1.2500 was absorbed.
I have a problem with buying when the currency is near a large area of supply because the end result is usually what you see on the 2 charts below which is why I passed on the long trade near 1.2485 on Friday. The 240 minute chart below shows that the small breakout area between 1.2340 and 1.2332 stopped the sell off and produced a minor bounce on Friday. Once the USDCHF drops below 1.2430, it will be an area of supply with a breakdown line at 1.2430. The 1.2378 breakout support area is the next place that the USDCHF should bounce. The small range will be 1.2378 to 1.2431. You could also see another bounce up to the 1.2485 area if this small area of support at 1.2431 holds. That would be a good place to enter a short. The area of demand at 1.2431 would be the first target.