Potential for a pull back within a new uptrend

• USD/CHF has formed a new uptrend after reversing higher following the August 29 low. 
• The RSI has exited overbought, indicating a risk of a pull back developing within the uptrend. 

USD/CHF has been recovering since bottoming out at the August 29 lows. The pair kicked off the uptrend with a bullish Three White Soldiers Japanese candlestick pattern right after the August 29 bottom. This occurs when three green candlesticks of a similar size follow a new low. 

USD/CHF has probably now started a new uptrend and since “the trend is your friend” the odds favor more upside.

USD/CHF 4-hour Chart 

There is a risk USD/CHF could temporarily pull back before it continues higher, however, as the Relative Strength Index (RSI) momentum indicator has just exited overbought territory. This provides a signal that the trend is likely to correct or reverse. 

The RSI exiting overbought was accompanied by the formation of a bearish Hanging Man Japanese candlestick pattern (shaded rectangle). The current candle is red and looking like it will probably end as a down candle, adding confirmation to the Hanging Man. 

If a correction unfolds it will probably pull back down to support at either 0.8503 or 0.8485. 

The dominant short-term uptrend is likely to eventually resume, however, and take the price back up. A break above 0.8541 (August 23 high) would see resistance at 0.8557 come into view, followed by 0.8617 if the uptrend proves strong.