EURCHF has been trading lower for the past four trading days. After opening the week at 1.0987, the currency pair has been on a smooth downtrend breaking support levels at 1.0955 and 1.0880. However, technicals show that EURCHF could be at the beginning of a bounce.
On the daily time frame, we can see that the currency pair is currently testing support at the rising channel from connecting the lows of September 5, September 26, and November 14. Yesterday’s candlestick also closed as a hammer which is widely viewed as a bullish confirmation as the shadow below the body indicates the lack of commitment from sellers to push the price lower.
Looking closer at the hourly time frame, there also seems to be an inverse head and shoulders pattern. A bullish candlestick has just materialized and closed above neckline resistance above the 1.0900 psychological handle.
Third-tier data on inflation and trade have just come out from euro zone and we’re seeing a little pullback from the currency pair. The final CPI reading for the third quarter showed that overall inflation rose 0.7% from last year while the core CPI report reveals a 1.1% uptick. Both numbers came in as expected.
On the other hand, the region’s trade balance fell short of the 18.7 billion EUR consensus when it printed at 18.3 billion EUR. The reading for September was also revised lower at 19.7 billion from 20.3 billion EUR.
Using the Fibonacci retracement tool and drawing from the lows of the European market open at 1.0892 to today’s intraday high, we could see the currency pair pull back to the neckline and the 38.2% Fib level at 1.0900. Setting a stop below today’s intraday low at 1.0880 and targeting the pair’s previous lows at 1.0955 will give you a nice 2.75:1 reward-to-risk ratio.Download our latest quarterly market outlook for our longer-term trade ideas.