Posted on May 11, 2017 at 10:36 am GMT by the XM Investment Research Desk
EURCHF hit a 7-month high of 1.0978 on Tuesday following a near 3-week rally that’s taken the pair sharply above the 50- and 200-day moving averages (MA). Prices have been struggling to rise above Tuesday’s peak however, with the 1.0980 area proving a strong resistance area.
The loss in momentum is highlighted by the stochastic oscillator. Both the %K and %D lines are in overbought territory and the %D line is rising above the %K, signalling a possible short-term correction. However, looking at the MACD, the histogram is rising and remains above the red signal line, indicating that the bullish bias is still in place, giving scope for further gains.
If prices manage to break above 1.0980, the 1.10 level will be the next resistance point to watch. But should the pair extend today’s losses, the 1.0950 level will likely act as immediate support.
In the event of a sharper sell-off, the 1.0895 level comes into view as the next support area, followed by 1.0857 and 1.0800. A drop below the 1.08 handle would open the way towards the 200-day MA (currently at 1.0776) and the 50-day MA (currently at 1.0751). Failure to hold above the 50-day MA would shift the near-term bias to bearish.
In the medium term, EURCHF appears to be moving from a neutral to negative outlook to a neutral to positive one as the 200-day MA is flat-lining after its long-term downtrend and the 50-day MA is rising and closing the gap with the 200-day MA.