EURCHF up to January’s 2015 high

EURUSD & EURCHF, H1

German ZEW investor confidence fell back to -8.2 from 5.1% in the previous month. This is a more pronounced correction than anticipated and the first time sine July 2016 that pessimists outnumbered optimists. Back then it was the unexpected outcome of the Brexit vote that knocked confidence back and the index recovered in the following month. Apart from that one off negative number we have to go back to November 2012 to find negative readings. A clear warnings sign, even if the ZEW is surveying investors rather than the real economy and will thus be more impacted by market volatility and global uncertainties, which may or may not materialise. So far the view is that a slow down in growth momentum is quite welcome in the German economy, which is already running above capacity, but the clouds clearly are gathering on the horizon.

The slow down in growth momentum, weighed on Euro. The EURUSD has been seen reverting lower, down to 1.2378 after the data. The next immidate support levels, come to the recent hourly fractal low at 1.2371, and atteh Pivot Point at 1.2365. Hence is likely to see a rebound on that levels, and a continuation back high. However if pair does not manage to be held above these levels, then 30 minutes chart will be in our watch list, for a possible swing lower to the next support level at 1.2395.

Another interesting Euro cross is EURCHF, which has soared to a new 39-month highs above 1.1900, aided by concomitant gains in EURUSD and USDCHF. A background support for the cross is the widespread expectation for the SNB to remain strongly committed to negative interest rates until after the ECB starts tightening. The central bank’s chairman, Jordan, said in an interview over the weekend with La Liberte newspaper that “it is not yet time to change monetary policy,” adding that “we do not want to provoke an appreciation of the Swiss franc.” Jordan said that the economic situation has improved over the last year, but low inflation (at 0.8% y/y in March) remained, a problem.

EURCHF has rallied 11% from mid last year. A long standing target is held for the cross to return to the 1.2000 level, which was the SNB’s cap that was abandoned back in January 2015 in the face of euro depreciation caused by ECB monetary stimulus.

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