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Euro Outlook, Swiss Franc, US Dollar, EUR/USD, EUR/CHF – TALKING POINTS
- EUR/USD downtrend may accelerate as pair tests critical support level
- EUR/CHF compression zone causing pair to consolidate – what now?
- Pair edging closer to the month when SNB lifted the floor on EUR/CHF
EUR/USD Technical Outlook
EUR/USD may retest a multi-year swing-low at 1.0653 if the pair break below a key inflection point at 1.0783 where it had recently dipped below but recovered the following day. If EUR/USD once again punctures below this level with follow-through, selling pressure may become particularly acute. The prospect of a meaningful recovery may then become less likely given the number of technical barriers EUR/USD would have to clear.
EUR/USD – Daily Chart
EUR/USD chart created using TradingView
The short-term retreat would also fall in-line with the broader pullback EUR/USD has been experiencing after it failed to clear February 2018 descending resistance This opens the door to flirting with a multi-tiered support range between 1.0663 and 1.0520. If those technical floorboards are ripped up by sellers, the basement at 1.0352 could be at risk of being flooded with eager sellers looking to capitalize on the pair’s decline.
EUR/USD – Monthly Chart
EUR/USD chart created using TradingView
EUR/CHF Forecast
EUR/CHF’s descent following the bearish engulfing on December 2, 2019 has recently turned into a far steeper and more formidable slope of depreciation and has accelerated the pair’s losses. EUR/CHF did briefly break above the newly-formed resistance channel, though upside momentum quickly evaporated and the pair resumed their downward trajectory.
EUR/CHF – Daily Chart
EUR/CHF chart created using TradingView
Zooming in on the daily chart shows EUR/CHF is narrowly trading within a compression zone formed by descending resistance and stubborn support at 1.0508. Recent price action suggests a degree of indecision given the small-bodied nature of the candles and traders’ apparent reluctance to not climb above or below the technical cross sections that are pressuring it into a corner. However, a directional bias may soon be revealed.
EUR/CHF – Daily Chart
EUR/CHF chart created using TradingView
If EUR/CHF invalidates resistance, while there may be an initial bump higher, the pair’s gains may be capped by a key inflection point at 1.0610. On the other hand, if support cracks under the weight of growing selling pressure and the pair break below it with follow-through, EUR/CHF may experience heightened liquidation pressure.
EUR/CHF – Monthly Chart
EUR/CHF chart created using TradingView
The implications of such a move when taken from the perspective of a monthly view could be significant. EUR/CHF is less than 1.50 percent away from retesting a support area between 1.0334 and 1.0235. Breaking below the lowest tier would mark the softest reading since the pair plunged over 30 percent after the SNB removed the floor on the EUR/CHF exchange rate in January 2015.
--- Written by Dimitri Zabelin, Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitri Twitter
