Technical Analysis – EURCHF’s bearish run break almost 3-year low; indicators are oversold

Melina Deltas, XM Investment Research Desk

EURCHF had a bearish start on Tuesday, with the price breaking a crucial support at 1.0660 to drop to 1.0656, the lowest since April 2017. Currently, the pair is moving marginally above this bottom but has also increased distance below its negatively sloped moving average line and the Ichimoku cloud, indicating that the ten-month downtrend may hold for longer.

Momentum signals are bearish as well as the red Tenkan-sen line, which is below the blue kijun-sen line and looks to be heading south. However, the RSI has reversed slightly higher after the decline in the oversold zone, signaling that the downfall might come to an end soon. Also, the MACD is still holding in the bearish area but is moving higher above the trigger line.

Should the price extend declines below the today’s low, the 1.0615 level could act as barrier to downside movements, taken from the trough on June 2016. Below that, the focus could shift straight to 1.0580 where the price posted an inside swing high on May 2015.

On the other hand, a recovery could retest the 20-day simple moving average (SMA) at 1.0705 before attention turns to the zone of 1.0780 – 1.0790, including the 40-day SMA and the Ichimoku cloud. Moving higher, the 1.0830 resistance and the 23.6% Fibonacci retracement level of the down leg from 1.1470 – 1.0656 at 1.0850 should attract attention near the falling trend line. A significant rally above this region could last until the 38.2% Fibo of 1.0970 shifting the outlook to neutral.

Turning to the long-term picture, the bearish outlook remains intact after the breach of the 1.0660 bottom. A jump above the diagonal line would restore the neutral mode.