And so the potential double top in EUR/USD (and its correlated currency pair, USD/CHF) appears to have fizzled out, alongside repeated expectations of a U.S. dollar bounce. This returns forex traders to the original call of ongoing USD weakness and possible parity with CHF, with a run on the historic EUR/USD high of 1.6037 not outside all bounds.

Below is the current four-hour chart of USD/CHF:

The price action refused to respect support at 1.0191, marked by the lower yellow line, instead sinking to 1.0117 before turning and retesting secondary support-resistance at 1.0230 (not marked). When that level held as resistance, the price action turned again and sank even lower, to set a new 2009 low at 1.0082—one good day’s trading from the most important psychological level of all.

And only the determination of the Swiss National Bank stands in the way.

Drawing a Fibonacci retracement pattern from 4 September’s reaction high of 1.0698 to 23 September’s low of 1.0188, roughly the same as the support point for the original double bottom, shows the intended neckline of same (1.0450) to nearly match the 50% retracement line (1.0443). The dip below support at 1.0191 completes the 100% retracement. However, the jagged up-and-down motion of the ensuing price action hardly fits the expected sharp drop of a Fibonacci completion.

Taking the chart out to the daily time frame shows the 161.8% extension level to lie at 0.9876. This coincides with a long-term support-resistance level last encountered March and April of 2008, visible on the lower left of the chart, below:

The usual caveat of awaiting confirmation of the chart pattern before initiating the trade certainly holds. In addition, retail forex traders are advised to be wary of the SNB, one of the few central banks willing to enforce their verbal rhetoric with direct intervention.

The only Swiss event risk likely to influence this potential trade is the September trade balance, scheduled for release Thursday, 22 October, 6:15 AM GMT (5:15 PM Canberra time). Forecasts are thin on the ground; however, the trend shows the cheerful Swiss trade surplus narrowing sharply over the past few months. Should exports fall more than −2.0% m/m or contract on a year-over-year basis, particularly the all-important trade balance with the Eurozone, the SNB is likely to consider direct intervention again.

However, if that intervention should occur, the SNB has quite a piece of work. Another look at the four-hour chart above shows considerable depth between the descending price action and the bearish trendline, drawn in aqua from 18 March’s high of 1.1264 and respected 30 July (1.0933) and 10 August (1.0882). To have any meaning beyond the symbolic, the SNB would need to push the price action above that bearish trendline, currently near the 1.0550 level—a move of 400+ pips—which brings us back to the original double bottom.

A similar situation holds for EUR/USD, of course, only in reverse. On the four-hour chart, note how the 100% retracement line serves as support:

Going to the daily EUR/USD chart shows something rather interesting:

The 161.8% extension coincides very closely with resistance at 1.5282; the 261.8% with another at 1.6000. Such reinforcement at support-resistance levels tends to strengthen them, meaning those could be difficult on EUR/USD’s predicted path up.