Next leg of recovery awaited for EURCHF

As the dust settles from the Swiss National Bank “Black Swan” a couple of weeks ago, it has become apparent that abandoning the EURCHF floor was a tactical retreat rather than a capitulation. 

So while there is no more talk of “utmost determination” and threats to sell “unlimited quantities” of CHF against EUR, a chastened SNB is playing a smarter game by quietly holding down the currency on a range of cross rates. But the most important is still EURCHF and heavily negative Swiss LIBOR rates should underpin this cross slowly but surely as the weeks go by. 

In addition, the tone of economic data out of the Eurozone lately has been mildly positive and a good number for fourth-quarter GDP today will give support to the EUR.

Management and risk description

Since last month’s SNB-inspired “shock low” at .8590, EURCHF has been undergoing a strong recovery. Recent corrective consolidation is not dissimilar to the multi-day consolidation, which occurred a few weeks ago (refer daily chart below) and is expected to produce a similar outcome.

EURCHF’s short-term corrective consolidation is probably now ending and is looking for a sustained break above the 1.0650 resistance level to yield a minimum upside objective of 1.0850 over coming days.

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Parameters

Entry: For today only: buying EURCHF upon a break above 1.0650 resistance

Stop: 1.0530, initially

Target: 1.0850

Time horizon: allow several days for target to be met

EURCHF daily chart 

 

Source: ThomsonReuters— Edited by Gayle Bryant