The Swiss franc strengthened against the euro following the drop in market sentiment, and the EUR/CHF may continue to fall lower over the near-term as market participants expect the European Central Bank to lower the interest rate further however, as the Swiss National Bank pledges to put a floor on the exchange rate, speculation for another currency intervention is likely to hold the EUR/CHF within a tight range over the week.
Currency Pair: EUR/CHF
Chart: 60 Min Charts
Short-Term Bias: Flat
Analysis Update
The EUR/CHF pushed higher during the overnight to cover the gap from the 120-SMA, but the lack of momentum to push above the 1.5200 level could lead the pair to fall back below the moving average as equity futures foreshadow a lower open for the U.S. market. Over the remainder of the week, we may continue to see the euro-franc retrace the sell-off from early this month as the Swiss National Bank pledges to keep a floor on the exchange rate but nevertheless, as investors price-in a 25bp rate cut by the ECB, the pair may continue to fall lower as the Euro-Zone faces its worst economic downturn since World War II. Moreover, as the economic calendar for the following week is expected to reinforce a weakening outlook for growth and inflation for the euro-region, fundamental headwinds are likely to drag on the single-currency, and we are likely to see the EUR/CHF continue to hold its current range over the remainder of the month. However, the fundamental event risks scheduled for the next 24 hours may call for a change in our outlook.
Analysis
The Swiss franc strengthened against the euro following the drop in market sentiment, and the EUR/CHF may continue to fall lower over the near-term as market participants expect the European Central Bank to lower the interest rate further however, as the Swiss National Bank pledges to put a floor on the exchange rate, speculation for another currency intervention is likely to hold the EUR/CHF within a tight range over the week. After slipping to a low of 1.4299 in October, the euro-franc snapped back to reach a high of 1.5885 on 12/15, but the lack of momentum to push back above 1.5540-50 (21.4% Fib) paired with expectations for a rate cut by the ECB may continue to weigh on the pair however, as the SNB commits all of its available tools to stem the appreciation in the Swiss franc, fundamental headwinds from both side are likely to keep the pair range-bound as the economic downturn in Europe intensifies. Over the next few hours of trading, we may continue to see the EUR/CHF test 1.5090-1.5100 (50.0% Fib) for short-term support, and may push above the 120 SMA to make a run for 1.5270-80 (38.2% Fib) but nevertheless, the euro-franc should continue to hold a narrow range over the week as the ECB Governing Council fails to meet on common ground even as the outlook for growth and inflation falter. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
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