EURCHF could be in for a reversal from its recent rally, as price formed a double top pattern on its 1-hour chart. The pair failed in its last two attempts to break past the 1.0980-1.1000 barrier, creating a reversal formation with the neckline at 1.0890.
A break below the neckline support could send EURCHF down by a hundred pips or the same height as the chart formation. On the other hand, a bounce off support could lead to the formation of another top.
The 100 SMA is below the longer-term 200 SMA on the 1-hour time frame, suggesting that the path of least resistance is to the downside. However, both oscillators are already indicating oversold conditions so a bounce could take place once RSI and stochastic start climbing higher.
The main event risks for the euro today are ECB Governor Mario Draghi’s testimony and the ZEW economic sentiment figures. Draghi could shed more light on why the central bank refrained from adding stimulus in their latest policy statement and give some clues on what their next moves might be. Meanwhile, Germany’s ZEW reading could see a rise from 0.5 to 2.8 to show more optimism while the region’s figure could tick up from 4.6 to 6.7.
Later on in the week, the SNB decision will be announced and even though no actual policy changes are eyed, the tone of their statement could determine where the franc is headed next. SNB head Jordan didn’t talk much about policy in last week’s speech but he did refrain from jawboning the currency.
The lack of dovish remarks could keep the franc supported against its peers, especially if risk aversion returns to the markets once more. The franc could also enjoy some safe-haven flows as traders let go of their dollar holdings after FOMC member Brainard downplayed the odds of a September hike.