EUR/CHF is Forming a Double Bottom

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EUR/CHF is Forming a Double Bottom

The EUR/CHF has been persistently bearish throughout August. We can see that after a double top below 1.2177, price has been making lower highs and lower lows. The 4H RSI has tagged belwo 30, and has since held below 60, reflecting persistent bearish momentum. The 200-, 100-, and 50-period SMAs have been sloping down, in bearish alignment, and spreading apart until very recently. Price was also below all these SMAs until very recently. Thus the bearish outlook is very strong, but there are some early signs that the mode might be shifting.

EUR/CHF 4H Chart 9/8
eurchf 4h chart 9/8

(click to enlarge)

First of all, price is starting to move above the 50-period SMA, showing that the pace of the bearish trend is stalling. We also see price breaking a falling trendline, but in a sideways manner. Again, we are seeing a shift from bearish to neutral, but there is still bearish bias because the RSI is below 60.

Now, the range of this price bottom attempt is about 45 pips. So, a break below 1.2044 with a 45-pip projection, targets the 1.20 handle. This is a very key level which we should expect support at because the Swiss National Bank had vowed to keep EUR/CHF above 1.20.

Because of this possible dynamic around 1.20, we might want to put away that bearish bias because price is already near this low, and trading into 1.20 might not be a prudent idea. However, the bullish outlook might need to be limited in the short-term.

The immediate target for a break above 1.2090 would be the 1.2035 area (using the 45-pip target). But we should also anticipate resistance if price gets in to the 1.2115-1.2120 area, which contains a support/resistance pivot area, and the 200-period SMA.

The daily chart shows that there is resistance around 1.2130-1.2140 as well. This was a previous support area reinforced by a falling trendline that originates from the 2014-high at 1.2394.

EUR/CHF Daily Chart 9/8
eurchf daily chart 9/8

(click to enlarge)

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.