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EUR/CHF Price Analysis: EUR/CHF Remains Faithful to Fibonacci

EUR/CHF Price Analysis: EUR/CHF Remains Faithful to Fibonacci

Tammy Da Costa, Analyst
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EUR/CHF Forecast:

Fibonacci Holds Buyers at Bay

Since April 2018, bears trading EUR/CHF have dominated the market, with a strong downward trend prevailing for much of the time since. However, in May 2020, bulls were given some grace when the trend reversed in their favor until running into a major level of resistance in June. Since then, price action has remained in a confluent zone between key Fibonacci levels while bulls and bears continue to battle it out in an effort to drive out of its range-bound state.

The daily chart below highlights the Fibonacci levels from two major moves. The first Fibonacci retracement (pink) represents the medium-term move between the April 2018 high to the May 2020 low, while the second Fibonacci retracement (purple), represents the short-term move between the May 2020 low and the June 2020 high.

EUR/CHF Daily Chart

EUR/CHF Daily Chart

Chart Prepared by Tammy Da Costa, IG

Moving Average Forms Additional Support

An additional tool used by many traders to determine the trend is the moving average (MA) which measures the average price of a financial instrument over a specified period. By applying the 50 period MA to the four-hour chart below, the moving average now acts as additional support, with prices fluctuating around this line, indicating that the trend may still be trapped in a range. Further confirmation of this can be seen using the Relative Strength Index (RSI), which remains around the neutral level of 50, showing no preference to buyers or sellers.

EUR/CHF 4-Hour Chart

EUR/CHF 4-Hour Chart

Chart Prepared by Tammy Da Costa, IG

Moving Forward

While bulls may be looking for signs of a bullish continuation pattern, a breakout above 1.07566, the 38.2% retracement of the medium-term move, may result in the psychological level of 1.08 forming as resistance. A breakout above this level, may result in upward pressure towards 1.08175, the 23.6% retracement of the short-term move.

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On the contrary, a break below 1.07566 may lead to further downside with 1.07074, the 50% retracement of the short-term Fibonacci, forming a new level of support.

Client Sentiment

EUR/CHF Client Sentiment

According to client sentiment, at the time of writing, majority of retail traders are showing a bullish bias towards EUR/CHF, with 74% of traders holding long positions. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests that prices may continue to fall.

--- Written by Tammy Da Costa,

Contact and follow Tammy on Twitter: @Tams707

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.