Swiss Franc Analysis, EUR/CHF, NZD/CHF – TALKING POINTS
- EUR/CHF in a compression zone: in which direction will the pair break out?
- Pair’s capitulation could lead to a less-steep resumption of prior downtrend
- NZD/CHF’s cooling off period could precede a broader pullback in the pair
Between March and mid-May, EUR/CHF had been trading below a steep slope of depreciation before bursting out of a compression zone between it and support at 1.0500. The outburst saw the pair rise almost one percent in a single day, the largest move in a 24-hour period since September 2018. Subsequently, EUR/CHF climbed and shattered several layers of resistance along the way before topping at the January swing-high at 1.0860.
EUR/CHF – Daily Chart
EUR/CHF chart created using TradingView
After upside momentum had faded, EUR/CHF retreated over two percent and stumbled at familiar levels that previously had acted as resistance. Now, the pair is trading below descending resistance and support at 1.0610. If the downward-sloping ceiling holds, EUR/CHF’s capitulation could inspire additional sellers to enter the market, and a bearish bias could exacerbate the pair’s losses.
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On the other hand, if EUR/CHF is not ready to go lower, the pair may break resistance, but its ascent could be curbed by a near-term ceiling at 1.0665 and its big brother at 1.0679. Having said that, surmounting those obstacles could open the door to further gains if EUR/CHF’s triumph over those levels signals the beginning of another bullish spike.
NZD/CHF has been trading around a myriad of back-to-back technical barriers, and is now stuck in a short-term congestive range between support at 0.6052 and the bottom layer of the 0.6165-06223 resistance range. Given the number of shelves that NZD/CHF would have to clear before signaling a meaingful change in the pair’s trajectory versus the abyss that lies below it, the path of least resistance suggests a bearish bias.
NZD/CHF – Daily Chart
NZD/CHF chart created using TradingView
Breaking below the floor at 0.6052 may indicate that the pair’s cooldown period – following its remarkable ascent from the March-lows – may be the beginning of a broader pullback, rather than a momentary break before climbing higher again.
— Written by Dimitri Zabelin, Currency Analyst for DailyFX.com
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