Potential correction EURCHF
The EUR has been better bid since the Fed decision earlier this week, where Jerome Powell expressed his deep concern for below target inflation. At the same time, we've also been seeing healthier economic data reads out of the Eurozone, which included Thursday's better than expected unemployment and confidence data.
Significant rise in Eurozone economic sentiment: The European Commission Economic Sentiment Index rose markedly to 102.8 in January (Dec: 101.5), driven by higher confidence level in the industry and construction sector following the signing of a trade deal between the US and China. Another sub component, the consumer confidence index was unchanged at -8.1. Meanwhile, unemployment rate in the euro area slipped to 7.4% in December (Nov: 7.5%) reflecting an increasingly tight labour market.
Meanwhile the Swiss National Bank remains uncomfortable with Franc appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook, and from a US administration that has put Switzerland on its currency manipulator watchlist. Any signs of risk liquidation in 2020, will likely invite a very large wave of demand for the Franc that will put the SNB in the more challenging position of needing to back up its talk with action, that ultimately, may not prove to be as effective as it once was, given where we're at in the monetary policy cycle.
From a technical and trading perspective,EURCHF printed a key reversal day pattern earlier this week from the weekly first support pivot point, since the reversal pattern on Tuesday which flipped the daily chart bullish as per the near term Volume Weighted Average price, the market has been consolidating. With month end flows suggesting some CHF selling, bulls will look for a breach of the weeks highs to encourage further short covering, setting the stage for further corrective upside to test pivotal resistance sited at 1.0840 which represents structural and symmetry swing resistance as highlighted in the chart. A failure below this week's lows opens a move to test the pivot cluster towards 1.06 before another basing attempt could be expected.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
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High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!