After having rallied on only two of the last nine weeks, the Euro may be ready for a week long bounce against the Swiss Franc. As one may see from the chart provided below, EURCHF has been oscillating in a clean descending triangle over the last 11 months. The pair is currently resting on the 23.6% Fibonacci retracement level of the 11/02/07-03/21/08 selloff at 1.5709. Technical levels alone may hint at a bounce towards the 38.2% Fib retracement at 1.5903. The stochastic oscillator on the other hand is yet to signal over sold momentum.
Fundamentally speaking, such a long trade may be of the counter-trend nature and thus carry greater risk than a short order. Over the last week bond yield forecasts have moved up European Central Bank rate cuts to Q1 2009. During the first three months of the year, we may see the Trichet and company slash rates by up to 50bp. The bank will come under extraordinary pressure to act if Q3 growth reveals itself to mimic that of the second – negatively.
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