EUR/CHF: Key Resistance Holds, Bears Gather For A Picnic
Faraday Research | Jun 20, 2018 04:33AM ET
Following a firm rejection of a resistance cluster, we’re circling EUR/CHF for a potential short.
We can see on the daily chart that the resistance zone previously highlighted has performed its job well. Not only did the bearish hammer mark the swing high, but was also the prelude to two bearish range expansion days surrounding ECB’s meeting, renewed trade fears (CHF strength) and dovish remarks from Draghi yesterday.
With a swing high in place we’re looking for bearish momentum to be maintained for a run towards the 1.1368 low. And, as we’ve seen a strong directional move from the 1.2005 high and break of the 200-day MA, we’re not writing off the potential for it to break lower either. And, if it does, the August low at 1.1261 is in clear view.
Looking at the 4-hour chart we can see that a retracement line was broken to bring momentum back in line with the dominant, bearish trend. Moreover, a sequence of lower swing highs and lows have formed to underscore the development of the break lower. Whilst we remain below the 1.1586 swing high bearish intraday setup are preferred with a view to target the 1.1464/74 support zone.
However, if 1.1464/74 gives way, take note of the elongated bullish hammer which marks the 1.1368 low, as such a prominent bullish spike could spur profit taking behaviour. This makes a direct break beneath it less likely and increases the odds of whipsaw price action as we approach this key level.
That said, considering the predominantly bearish momentum since the 1.2005, we’d favour an eventual break below 1.1368 which leaves it open to opportunities further out if this does indeed occur.
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