EUR/CHF on watch as speculation about ECB QE grows

The EUR/CHF might not be the most important pair at the moment, but it could be on the verge of a potentially large move in the coming days and weeks. The forgotten pair recently came to life as it surged from around 1.0650 to around 1.0975 in a relatively short period. As a result, several resistance levels broke down, as too did the long-term bearish trend. However, since the second week of May, price has understandably gone into consolidation after that upsurge.

Market participants are probably waiting to hear from the European Central Bank and in particular what their plans are regarding QE: continue as planned or taper the stimulus package early thanks to recent improvement in Eurozone data. The Swiss National Bank will be very happy if the ECB were to drop its dovish stance and start tightening policy. So too will be the EUR/CHF bulls, probably.

But as speculation about early tapering of ECB QE grows, the euro could potentially rise further. This could put further upward pressure on the EUR/CHF pair. However, we will put this view on hold until and unless the cross shows a clear bullish signal again, for example a breakout from its triangle consolidation pattern to the upside. If this were to happen then the EUR/CHF could head towards the prior reference points at 1.0975, 1.1030 or even 1.1200, the high almost reached in early 2016.

However the bullish idea would become invalid in the short term in the event the EUR/CHF were to break below the key 1.0852-72 support range as highlighted in the chart. In this potential scenario, we may see a deeper correction or a complete reversal, so one has to be very careful if that support does give way. In this case, the gap that was left behind in April may get fully or partially filled before price makes its next move. Levels such as 1.0800 and 1.0710 may then become the next bearish objectives. 

Source: eSignal and FOREX.com.

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.