CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

EURCHF Probing Nearly 5Year Lows at 106 More Downside to Come

Article By: ,  Head of Market Research
February 19, 2020 11:14 AM

EUR/CHF Probing Nearly 5-Year Lows at 1.06 – More Downside to Come?

As the world’s most widely-traded currency pair, EUR/USD is understandably garnering all the headlines as it extends its historic drop; indeed, the pair has now closed lower in 11 of the past 12 days, and rates on track to run that streak to 12 of the last 13 days as of writing.

That said, the drop in EUR/CHF is no less impressive. Despite a reputation for relatively low volatility, the exchange rate between the major mainland European currencies has dropped over 400 pips in a little over two months to trade near 1.0600, its lowest level in nearly half a decade! Much of the move is due to weakness on the euro side of the pair stemming from soft economic data and the potential for additional ECB easing this year, but FX traders would be wrong to dismiss demand for the Swiss franc.

Over the last three months, Switzerland’s currency has gained ground against every one of its major rivals. Not coincidentally, this move coincides with gold’s rally off its local bottom near $1450; as a fellow “safe haven” asset which the Swiss National Bank holds in abundance, gold tends to be highly correlated with the Swiss franc, as the 50-day correlation coefficient in the chart below shows:

Source: TradingView, GAIN Capital.

At the moment, it’s hard to argue against the strong bearish trend in EUR/CHF. Beleaguered bulls will point to the slight bullish divergence in the RSI indicator and previous support in the 1.0620 area, but the strength of the selling pressure could easily overcome those slight bullish arguments. If rates are able to break conclusively below 1.0600, sellers could turn their eyes toward the psychologically significant 1.0500 area next. At this point, only a break above the 21-day MA and bearish channel in the 1.0675 area would erase the market’s bearish bias.


StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024