Today, I want to delve into the technical setup of the Swiss Franc to Japanese Yen (CHF/JPY) pair. This week, the Swiss Franc is expected to be quite volatile due to the upcoming interest rate decision. However, for now, let's focus on the technical aspect of this pair.
We are currently observing the effects of a false bearish breakout, highlighted in yellow on the chart. This false breakout occurred below the crucial support level of 166.8, marked in blue. This level has held significance throughout the year, acting as a solid support in both March and August, as well as in early September. Recently, this support was breached, but the price swiftly bounced back above it. This rebound above the former support line creates a classic false breakout scenario, which is typically a strong buy signal.
Following this recovery, the pair surged almost 300 pips, demonstrating a powerful bullish response. The recent rally met resistance at a crucial black downtrend line. This line is the key resistance level to watch. As long as the price remains below this downtrend line, the bullish sentiment is not confirmed, and sellers still have an opportunity to push the price back down towards the blue support. However, a break above this downtrend line would signify a long-term buy signal, indicating the potential for further gains. Until then, the battle between buyers and sellers continues, with the black resistance line as the pivotal point to watch.