EUR/CHF Breaks Bearish Trendline Ahead Of ECB
Matt Simpson September 9, 2019 10:37 PM
Despite no obvious signs ECB have intervened, EUR/CHF sprang higher after warning of a bear-trap and warns in a change in trend.
We’d noted that SNB had been intervening with their currency to prevent the Swiss franc from gaining too much traction, yet not by quite enough to prevent it from trending lower. This was slightly frustrating, as the trend continued to print lower highs and test key support levels, whilst at the back of our minds wondering if SNB were going to ratchet up the pressure and create a bearish shakeout. Well, it turns out they didn’t need to.
EUR/CHF has seen a clear shakeout at the lows and momentum suggests we could be looking at a deeper correction. Despite closing beneath 1.0835 last Tuesday, an inverted hammer on Wednesday warned of a reluctance to push lower. Thursday’s bullish engulfing candle took it firmly back above support and created a 3-bar reversal pattern (morning star reversal) to suggest a bear-trap had been triggered. Furthermore, yesterday’s clear break of the bearish trendline further suggests a new directional move could be underway.
- From here, we’d want to see EUR/CHF build a level of support along the broken trendline, or the swing high near 1.0928.
- Currently resistance has been found near the 1.0962 low and 50% retracement level but, given the clear momentum shift form the lows, we’d consider buying a dip and use the 1.0881 low as the ‘invalidation point’ to the counter-trend idea
Keep in mind that ECB are due to meet on Thursday, so Euro crosses will be prime candidates for bouts of volatility. Whilst markets are expecting a 10-20bps cut, we also need to factor in revised staff projections and potential for asset purchases (with many expecting them to move into equities). Either way, there’s a lot of expectation for ECB to act so, if these are not met adequately, we could end up with a higher Euro.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.