EUR/CHF: A Pocket Of Stability
Matthew Weller | Oct 09, 2014 04:50PM ET
While volatility has finally picked up in the U.S. dollar and global equities, there are still some pockets of the market that haven’t gone haywire (yet). One of the traditional havens for low volatility conditions, the EURCHF, remains relatively unperturbed with the big moves elsewhere.
Thus far, the Swiss National Bank (SNB) has refused to follow the European Central Bank (ECB) down the “negative interest rate rabbit hole.” Instead of increasing selling pressure on EUR/CHF, the pair has actually seen a big breakout above its 16-month bearish trend line on Friday. Thus far today, rates have pulled back to test the topside of the broken trend line before bouncing in today’s U.S. session. This is a great example of the polarity principle of technical analysis, or the idea that previous resistance levels, once broken, become future support levels. Having tested that potential floor, rates may edge back up to test 1.2130-40 resistance next.
Generally Bullish
The secondary indicators are also painting a generally bullish picture: the MACD is trending higher above its signal line and the “0” level, showing bullish momentum, though the RSI has struggled to break conclusively above the 60 level that marks bearish territory.
More broadly, the break of the long-term bearish trend line could pave the way a stronger rally toward the 61.8% or 78.6% Fibonacci retracements of the May-September decline at 1.2163 and 1.2195 respectively. On the other hand, even if rates break back below the trend line, the pair could still find buying support ahead of the SNB’s 1.20 floor near last month’s low around 1.2050.
Source: FOREX.com
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