Euro Goes Against the Grain Versus Swiss Franc
- Massive bullish daily candle
- Forms two inverted hammers
- Potential “double bottom”
The euro has rallied quite significantly during the trading session on Monday, breaking the top of a couple of inverted hammers from the previous two sessions. This of course is a very bullish sign, and what has been a very strong downtrend. There is a whole plethora of reasons to think that we could see some choppiness, but this is without a doubt the first thing that stands out on the chart.
The Moving Average Convergence Divergence (MACD) indicator at the bottom of the chart is rising over the longer-term, while the price has been falling. It’s also running out of momentum in general to the downside in the short term, so this suggests that perhaps the sellers are running out of steam. Does this mean that the entire trend is going to change? No. However, it does show that there is a lot of support in the general vicinity just below, near the 1.08 CHF level.
The action of the MACD flies directly in the face of the 50-day and 200-day EMA indicators. However, this market could be thought of as being oversold, and there is the possibility that we just formed a “double bottom” in this market. That is a huge reversal signal as well.
The technical analysis for this market essentially runs in a couple of different speeds. If you are a longer-term trend trader, then you are probably looking for an opportunity to start shorting this pair. However, as momentum has run out, shorter-term traders are looking to take advantage of this, which should be a significant bounce. The initial target for shorter-term traders will certainly be the red 50-day EMA above, and then perhaps even as high as the 1.10 CHF level, which is where the market had broken down from previously.
On the other hand, if the market was to break down below the 1.08 handle on a daily close, it’s very likely that the downtrend would continue. The euro is a mess, but the Swiss franc isn’t exactly doing well these days either. This is essentially a battle between a couple of lightweights.
The play going forward
The pair has formed a very strong candlestick, so the fact that it has happened certainly won’t be missed by traders. Now that the range has broken the top of the previous two candles and is trying to get a close towards the top of the candlestick for the day, this suggests that the market is very likely to bounce. Therefore, a break above the candlestick for the trading session on Monday is a buy signal, at least until the 50-day EMA is reached.
Alternately, if the market was to break down below the 1.08 CHF level, then it would show a continuation of the negative trend. Based on the previous consolidation, the target would more than likely be the 1.0750 CHF level, if not the 1.07 CHF level.