EURCHF Getting Defended at 1.0540
Cory Mitchell, CMT
Since March 9 the EURCHF has seen sharp bounces between 1.0550 and 1.0540. It is happening again as I write this. The rallies range between 20 and 70 pips. The buying was better able to buoy the pair in early March. Since March 12, the rallies have created overall lower highs and lower lows.
The pair is in an overall downtrend, but the declining EUR and strengthening CHF is something the Swiss National Bank (SNB) isn't a fan of. Recall that up until early 2015 the SNB was defending the pair from dropping below 1.20. When they abandoned their defense (buying euros and selling francs) the pair plunged below 0.98.
The entire loss was recovered, eventually, as the price rallied back to 1.20 by 2018. But since then, it has been all downhill again. The EURCHF is trading at it lowest levels since mid-2015.
Maybe the SNB is intervening causing this choppy trading of sharp rises followed by equally sharp declines, but it looks like 1.0540 is becoming a line in the sand.
Those that are bearish could look to short between 1.06 and 1.0610 with a relatively tight stop loss in case the buying intensifies. Or better yet, drop to a lower timeframe—like the 15- or 5-minute—and wait for a consolidation. Then short if the price drops below the consolidation. The trade provides for a short-term opportunity but also longer-term potential if the pair continues its downtrend, breaking convincingly below 1.540.
A scarier trade, in my opinion, is going with those who are buying near 1.0550 and 1.0540. The pops do provide short-term opportunity, but with lower swing highs and lows developing, the question is how long will it last? If the price can start putting in higher highs and higher lows again, then the pair may be making a turn to the upside.
Whether trading short-term or long-term, use the correct position size to manage risk and maximize returns.
By Cory Mitchell, CMT. Join me in my free Facebook swing trading group.
Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.