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EURCHF – A Notable Underperformer this week

Market Analysis

EURCHF, Daily & H4

EURCHF has been a notable underperformer this week, yesterday logging a one-month low at 1.1626. The move partly reflects a pricing in of the evident disquiet at the ECB about the extend of the euro’s recent rally, which looks to be have a dampening impact on hawkish voices at the central bank. There is also some concern appearing in market research notes about the Italian election in early March, given the popularity of anti-EU Five Stare Movement. SNB’s Jordan has been voicing views about currencies this week, arguing that the solid U.S. economy and Fed’s tightening path point to a dollar rebound ahead, while saying that the franc remains “highly valued” despite the correction since mid last year.

Before the current correction, EURCHF logged a 37-month high last week at 1.1833. The broad rally the cross has been seeing since mid last year, seen concomitantly with economic recovery in the Eurozone, alongside the apparent passing of the worst of the existential political threats to the Euro area, is now on pause. EURCHF logged to 1.1665 yesterday, after it broke the strong support at 50-DAY SMA seen since August 2017.

Today the pair continues southwards at 1.1637, below the 23.6 Fibonacci level, 20 and 50-Day SMAs, with Bollinger Bands being extended downwards. In the shorter-term picture, negative momentum is strongly holding today, with immediate support at 1.1590- 1.1608,  which is the weekly S3 and slightly below the 38.2% Fibonacci retracement level of the last upward movement from August 9. A drop below this area would take the pair closer to the 50% Fibonacci mark of 1.1540. Short-term momentum indicators such as 4-hours ones, are holding in the negative area as well. The RSI indicator is flattening in the oversold terittory (below the 30 level) , whilst the MACD oscillator remains negative since January 24 indicating further weak momentum. The further intra-day down movement, can also be confirmed by the last big bearish 4-hour candle.

To the upside, EURCHF would need to reach, 1.2000 to fully reverse the losses that were seen after the SNB abandoned the franc cap in January 2015.Therefore long term resistance level is at 1.1980if the price breaks above this week’s high of 1.1830 and extends its gains beyond the upward sloping channel. In short-term (H4 chart), resistance is at the confluence of S1, 20 and 200 -period SMA, at 1.1718. Therefore only a break above that within the day could change suggest a bullish signal.

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Andria Pichidi

Market Analyst

HotForex

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Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71.05% of retail investor accounts lose money when trading CFDs with HF Markets (Europe) Ltd. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please read the full Risk Disclosure.