EUR/CHF tumbled yesterday, breaking two support (now turned into resistance) barriers in a row. However, the slide stopped within the 1.1225/35 zone, which provided decent support in the second half of September, and then, the rate rebounded somewhat. The pair continues to trade within the downside channel that’s been containing the price action since the beginning of November and hence, we would consider the near-term outlook to be negative.
We would expect sellers to jump back into the action soon and perhaps drive the rate down for another test within the 1.1225/35 territory. If they manage to overcome that zone this time around, then we may see them extending the slide towards the 1.1185 area, which is defined as a support by the lows of the 7th and 10th of September.
Shifting attention to our short-term oscillators, we see that the RSI, although below 50 and below its respective downside resistance line, rebounded within its below-30 zone, crossed above 30, and now points up. The MACD lies below both its zero and trigger lines but shows signs of bottoming as well. These momentum studies suggest that the current rebound may continue for a while more before the bears decide to shoot again, perhaps for the rate to test the 1.1265, or even the 1.1280, zone as a resistance this time.
Even if we see a break above 1.1280, EUR/CHF would still be trading below the upper bound of the aforementioned channel and therefore, we would still consider the near-term picture to be cautiously negative. We would like to see a decisive break above 1.1310 before we start examining the case of a possible positive reversal. Such a break may initially aim for the 1.1345/55 zone, the break of which could carry extensions towards the 1.1400 barrier.
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