Euro Outlook Bearish as EUR/CHF Approaches 5-Year Low

Euro Outlook, Swiss Franc, EUR/CHF Technical Analysis – TALKING POINTS

• Euro outlook bearish vs Swiss Franc as EUR/CHF tests five-year low
• Key support in focus. If broken, it could catalyze an aggressive selloff
• What are the fundamental elements favoring the Franc over the Euro?

EUR/CHF OUTLOOK

Following the Bearish Engulfing on December 2, EUR/CHF has been on a steady downtrend and has declined just shy of three percent. The pair’s descent initially encountered some friction at 1.0732 (whited-dotted line) before turning lower where it metamorphosed from support to resistance. Since then, EUR/CHF briefly traded above the floor at 1.0679 but recently shattered trend-defining support at 1.0665 and flirting with a five-year low.

EUR/CHF – Daily Chart

EUR/CHF chart created using TradingView

Looking at a weekly chart demonstrates why EUR/CHF’s position is technically significant. A downside breakout opens the door to testing five-year lows (gold-dotted line) which, if also broken could inspire further liquidation. However, a recovery may also be in the cards with positive RSI divergence showing downside momentum fading. It should be noted, however, that this does not suggest that a turn higher is inevitable.

EUR/CHF – Weekly Chart

EUR/CHF chart created using TradingView

EUR/CHF – Monthly Chart

EUR/CHF chart created using TradingView

From a fundamental perspective, recent market conditions have made holding the anti-risk Swiss Franc comparatively more attractive relative to the Euro. The coronavirus has infected risk appetite not just in Asia but Europe as well. This comes as Eurozone economic data has started to underperforn relative to economists’ expectations. Are analysts overestimating the strength and durability of the Eurozone economy?

EURO TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter