Euro struggling against Swiss franc

Anthony Gallagher Anthony Gallagher

8 July 2019

The Euro continues to show signs of weakness against the Swiss franc, as we had recently broken through significant support. That being the case it’s very likely that we will see a continuation, especially considering that the weekly candlestick from the previous week has been a shooting star, something that of course will attract a lot of attention.

Continuation

This move should be thought of as continuation, as we have recently broken through major support. That support had lasted several months, at the round and psychologically significant figure of 1.12 EUR. Ultimately, this should continue to drive prices lower, as the break down through there and then the retest of it showing signs of exhaustion should show signs of continuation in general. To the downside, the most obvious support would be at the psychologically important figure of 1.10 EUR.

Sentiment

There are a couple of different things it could be driving this, not the least of which would be the sentiment. Beyond that, Deutsche Bank is firing 18,000 workers as they get out of the global equities game. Keep in mind that this is one of the most important banks in Europe and has been a bit of a “zombie bank” for years. This could cause major issues in the European Union, so it’s possible that money is heading towards Switzerland to avoid some of the possible destruction from this situation.

Central banks

The European Union is likely to see more monetary easing as the ECB has recently stated. Ultimately, we could see the Euro fall due to this alone. The Federal Reserve is getting ready to cut rates as well, which will have people wondering exactly why that is, considering that the economic numbers in the United States are so much more superior to others. If that’s going to be the case, people are probably going to start looking for safety. There are few places safer than Switzerland to store your money right now. Central banks around the world cutting interest rates isn’t a good sign. True, it can provide a short-term boost to risk assets, and in the end these things don’t happen in a vacuum, and never for a good reason.

Trading this pair going forward

Looking at the chart, it’s easy to see that we are continuing to drift lower, and the 1.10 level makes a lot of sense as it is a large, round, psychologically significant figure. However, there is a gap underneath that needs to be filled, which starts at the 1.08 level. Because of this, longer-term traders are probably going to continue to short this market, understanding that the 1.10 level will, of course, attract a lot of attention as not only the psychology of it dictate, but we also have a major impulsive candlestick from April that starts at that level.

 

Fading rallies should continue to work, but keep in mind that this pair does tend to move rather slowly. This is more of an investment and less of a trade. However, the question now is: “What does this say about the global economy in general?”


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