• EUR/CHF bears are running head in with weekly support.
  • 1.050 could be a tough nut to crack from a technical perspective. 
  • SNB is potentially comfortable with a stronger CHF instead of hiking rates. 

EUR/CHF is turning heads in the currency markets at the start of the week as the bears take control and target an imminent break of the 1.05 key psychological level. At the time of writing, EUR/CHF is trading down 0.21% after sliding from 1.0546 to a low of 1.0515.

This is the lowest level since May 2020 for the euro against the safe-haven Swiss franc when EUR/CHF was at 1.0504. A double whammy of inflation fears and renewed concerns over the COVID-19 pandemic that is sweeping across mainland and eastern Europe in a fresh wave is pressuring the risk-sensitive markets.

Swiss National Bank governing board member Andrea Maechler said modest Swiss inflation, at an annual rate of around 1.2%, was capping the franc's rise. But she reiterated the SNB's commitment to currency market interventions designed to limit if needed, the effect that the Swiss franc's strength has on Switzerland's export-orientated economy.

CHF is a natural hedge against inflation

Deutsche Bank's Robin Winkler argued that the franc is a good stagflation hedge, ''and the SNB is likely to be more tolerant of currency appreciation than in the past, considering it insurance against importing inflation from the Eurozone.''

''The rates market has been trying to price the first hike from the SNB next year, in sympathy with the ECB, but in our view the SNB will use the exchange rate, rather than the policy rate, to tighten policy.''

EUR/CHF technical analysis

While there are prospects of a break of 1.0500, there are also chances for a significant correction to the upside in the near future, from a technical standpoint. 

The weekly chart shows that the price has fallen for eight consecutive weeks without a correction. This is the longest weekly losing streak since the turn of 2010. While that in itself is not a reason to try and catch a falling knife, it does give rise to the prospect of a correction in the near future.

Profit-taking could emerge around a test of the 1.0500 level and result in consolidation and a phase of accumulation that could well target the July 2020 lows that have a confluence with the 23.6% Fibo at 1.0605 and then the November 2020 lows that have a confluence with the 38.2% Fibo near 1.0660. On the downside, 1.0470 could be a stronger level of support according to the monthly chart should the bears conquer bullish commitments at 1.0500. 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

GBP/USD extends recovery gains to near 1.3250, as BoE looms

GBP/USD extends recovery gains to near 1.3250, as BoE looms

GBP/USD extends the recovery to near 1.3200 in European trading on Thursday, having found buyers near 1.3150. A fresh US Dollar pullback and a rebound in risk sentiment offer support to the pair ahead of the BoE policy announcements. 

GBP/USD News
EUR/USD advances to 1.1150, focus shifts to ECB-speak

EUR/USD advances to 1.1150, focus shifts to ECB-speak

EUR/USD is well-bid near 1.1150 in the European session on Thursday. The pair is underpinned by the renewed US Dollar retreat and an upbeat mood. Traders digest the Fed's dovish outlook, bracing for ECB-speak for fresh trading incentives. US data are also eyed. 

EUR/USD News
Gold price jumps back closer to all-time peak, $2,600 remains in sight amid fresh USD weakness

Gold price jumps back closer to all-time peak, $2,600 remains in sight amid fresh USD weakness

Gold price regains positive traction following the previous day's pullback from the all-time peak and builds on its steady intraday ascent heading into the European session on Thursday. 

Gold News
BoE expected to keep interest rate unchanged at 5% as price pressures persist

BoE expected to keep interest rate unchanged at 5% as price pressures persist

After a close call in August, the Bank of England’s September interest rate decision is keenly awaited for fresh cues on the bank’s future policy action and the pace of its bond sales.

Read more
Bitcoin surges to $62,000 mark after 50 bps Fed rate cut

Bitcoin surges to $62,000 mark after 50 bps Fed rate cut

Bitcoin and Ripple eye for a rally as they break and find support around their resistance barrier. Meanwhile, Ethereum demonstrates signs of recovery as it approaches a critical resistance level, indicating that an upward rally could be on the horizon if it successfully breaks through.

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Forex MAJORS

Cryptocurrencies

Signatures