EURCHF Accelerates to the Downside

JFD Team JFD

EUR/CHF has been in a tumbling mode since yesterday. Today, during the early European morning, it broke below the lower end of a downside channel that had been containing the price action since the 12^th of July. Thus, with the latest short-term downtrend accelerating, we will stick to our guns that the near-term outlook is negative.

Following the free fall, the rate found support near the 1.1385 level and then, it rebounded somewhat. If the bears are strong enough to jump back into the action from current levels, we would expect them to aim for another test near that zone. That said, we would like to see a clear dip below 1.1365 before we get confident on larger declines. Such a move is likely to pave the way towards our next support hurdle, at 1.1320, defined by the low of the 21^st of August 2017.

Looking at our short-term oscillators, we see that the RSI dipped below its 30 line, but now shows signs that it could bottom. The MACD lies below both its zero and trigger lines, pointing down. Both indicators detect downside momentum, but the fact that the RSI appears ready to bottom within its below-30 zone, make us cautious that a corrective bounce may be in the works before sellers decide to seize control again.

Such a recovery may challenge the lower bound of the aforementioned channel as a resistance this time. That said, if that bound fails to stop the rate from entering back within the channel, then we may see a break above 1.1460, which could lead to a test near 1.1490. Another break above that level could aim for the upper bound of the channel.

However, even if this is the case, we would still see a decent chance for the bears to take charge from near that zone. We would like to see a clear move above the channel’s upper bound before we abandon the bearish case. Something like that could initially open the path towards the 1.1560 resistance, marked by the peak of the 8^th of August, the break of which could see scope for more upside extensions, perhaps towards the 1.1600 territory.

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JFD Team

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