Chart Of The Day: EUR/CHF Likely To Continue Higher
Fawad Razaqzada | Feb 26, 2021 12:59
This article was written exclusively for Investing.com
Right now everyone is talking about rising US bond yields and how this might impact gold, the dollar and equity markets. Not many people are talking about the EUR/CHF, which takes the dollar, stocks and yields out of the equation.
Yet this forgotten currency pair looks the most constructive, after its big breakout earlier in the week. I think the EUR/CHF is likely to continue higher for weeks to come, potentially providing a lot of trading opportunities on the long side—similar to how the GBP/CHF broke out. You should add EUR/CHF to your FX watch list if you haven’t already.
If you have been involved in the financial markets longer than a few years, you will know all about the EUR/CHF. However, in recent years it has fallen off the radar as it has not been very active and daily ranges have been very tight. But it never broke its long-term bullish trend line, and owing to the recent optimism about lockdowns being lifted, this forgotten currency pair has burst back to life again after spending months in consolidation.
Although rates have come back down over the past couple of days, the damage is already done for the bears. The lengthy consolidation and the subsequent bullish breakout above old resistance in the 1.0870 to 1.0915 area means the path of least resistance is now clearly to the upside.
From a trading point of view, I would look to buy any future dips back to support rather than sell into rallies.
What I would ideally like to see next is for rates to dip back down to that 1.0870 to 1.0915 old resistance area, which should then turn into support, leading to a nice rebound.
Alternatively, if that doesn’t happen, then a period of consolidation around current levels would also be ideal, as this would help the price work off its short-term overbought conditions through time rather than price action (i.e. a sell-off). Then, one could look to buy the potential breakout above any continuation patterns it forms, such as a bull flag or falling wedge.
In terms of upside hurdles, there is some short-term resistance that needs to clear around 1.1000 to 1.1015—this being the head of Thursday’s inverted hammer. Beyond this, there is not much further immediate resistance seen until 1.1200.
Anyway, the key takeaway point is that with such a strong resistance area (1.0870 to 1.0915) having been cleared after a very long period of consolidation, it is highly likely the EUR/CHF will continue higher for weeks and possibly months to come. Thus, any short-term dips in the interim should be seen as retracements rather than trend reversal, until such a time that the price makes a distinct lower low.
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.