EUR/CHF: Falling Wedge Could Mean A Breakout
Blackwell Global | Aug 19, 2016 01:30AM ET
Key Points:
- Falling wedge nearing completion.
- Should remain constrained by along-term descending triangle.
- Parabolic SAR remains bullish.
The EUR/CHF is nearing the end of its short-term falling wedge formation and this could see the pair make a fairly substantial recovery in the coming days.
Specifically, this upside breakout could bring the pair back into contact with the upper constraint of the long-term descending triangle pattern at around the 1.0883 level.
However, if this occurs, it remains likely that the EUR/CHF will be constrained by the long-term trend and will stay bearish until at least mid-September.
Firstly, looking at the H4 chart, it is relatively self-evident that the EUR/CHF has been declining in a falling wedge configuration for the past week or so. However, it is also now becoming clear that this recent slip could be nearing completion as the pair reaches the 23.6% Fibonacci level around the 1.0826 price.
This being said, the EUR/CHF is expected tobounce between the upper and lower constraints of the wedge at least once more prior to any potential breakouts.
As shown above, there is some fairly robust resistance inplace around the 1.0847 mark as this represents an intersection of the falling wedge’s upside constraint and the 38.2% Fibonacci level. This is chiefly the reason why the pair is expected to reverse at this point and not breakout until its subsequent rally.
Likewise, the reason one can be relatively confident that the EUR/CHF is not simply going to push through its current support is because this is the intersection of the downside constraint and the 23.6% Fibonacci retracement.
Once the pair has broken free of the falling wedge pattern, it should begin to climb up to around the 1.0883 level before reversing and continuing with its long-term bearishness.
This reversal will be the result of the rather heavy downward pressure being supplied by not only the 61.8% Fibonacci level, but also the upper constraint of the long-term descending triangle formation.
As is shown below, this triangle is still very much intact and when combined with the daily EMA readings, this should keep the selling pressure on for a significant period of time.
Get The News You Want
Whilst the direction of the imminent breakout is relatively certain, exactly which direction the pair will breakout in once the triangle has completed is less clear cut. As a result, fundamentals will likely become vital as the EUR/CHF reaches the end of this pattern in mid-September.
However, the daily Parabolic SAR currently retains its long-term bullish bias which could be hinting that the pair is set to push higher come September.
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.