Technical Analysis – EURCHF resonates sideways towards supportive trend line

Anthony Charalambous, XM Investment Research Desk

EURCHF has adopted a fairly horizontal demeanour for nearly two-months now and appears to be approaching a medium-term ascending trend line pulled from the 1.0505 low. The confused simple moving averages (SMAs) further reflect the directionless tone that has grasped the pair. The 50-period SMA has crossed below the steadied 200-period SMA, while the 100-period SMA has become fixed above it.

The short-term oscillators reflect conflicting signals in sentiment. The MACD has dropped beneath its red signal line and the zero mark, while the RSI is pointing up in bearish territory.  Yet, despite the %K lines’ marginal dip, the stochastic oscillator seems more or less neutral.

To the downside, initial friction may develop from the 1.0739 neighbouring obstacle. Slightly underneath, sellers may meet the lower Bollinger band, ahead of the key 1.0711 to 1.0726 foundation of the range, which is reinforced by the overlapping diagonal line. Should this support section fail to halt the decline, the price may target the 1.0700 handle, before further deterioration steers the pair towards the critical 1.0649 trough from July 14.

If buyers re-emerge, early tough resistance may develop from the 50-period SMA at 1.0762 until the 100-period SMA at 1.0783. If a sustained drive upwards overcomes this zone, which also includes the mid-Bollinger band and the 200-period SMA at 1.0774, the pair may shoot higher for the upper Bollinger band near the 1.0800 hurdle. Overrunning the round number may propel the price towards the 1.0816 high, while eyeing the resistance section of 1.0846 to 1.0850. More gains may then challenge the near three-month peak of 1.0876, in attempts to reinstall confidence in the pair.

Summarizing, EURCHF still holds a neutral-to-bullish bearing above the rising trend line and the 1.0711 – 1.0726 base. A break above 1.0876 or below 1.0711 could reveal the next price direction.