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Get Ready to Short EURCHF

Get Ready to Short EURCHF

2018-05-22 15:45:00
Martin Essex, MSTA, Analyst

EURCHF has fallen steeply since May 14, dropping in six of the past eight sessions, and could now be poised for an even more significant decline. However, it might be wise to wait a little longer before shorting the cross.

Looking first at the weekly chart, there are two important trendlines to take note of: the first connecting the 2015 lows (after the January crash) with the 2017 lows, and the second joining the 2017/18 lows. The former is still some way away but the price is currently sitting right on the latter.

EURCHF Price Chart, Weekly Timeframe (May 2015 – May 2018)

Latest EURCHF weekly price chart.

Chart by IG

This can be seen more clearly on the daily chart below. The price has already fallen through the 100-day, 50-day and 20-day moving averages so it is clearly in a downtrend but it would be useful to see a clear decline through the trendline support for confirmation – particularly as there is now an “oversold” warning from the 14-day relative strength index, or RSI.

EURCHF Price Chart, Daily Timeframe (November 17, 2017 – May 22, 2018)

Latest EURCHF daily price chart.

Chart by IG

Once that support is breached, the initial target would be the February 27 low at 1.1482, followed by the February 8 low at 1.1447. As for the upside, there is now very strong resistance just below the psychologically important 1.20 level, which capped the price in the second half of April and into May.

Before that, the price would have to move back above all three of the moving averages mentioned, which should slow down any attempt to rally. The downside is therefore favored over the upside, but waiting for the trendline breach would be better for all but the bravest.

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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