Is the EUR/CHF overbought or oversold?The EUR/CHF pair is currently in between the key levels around 0.97000–0.97900. We might see a bounce from here up to the next resistance of 0.99500 and even up to the 1.00500 level, in confluence with the 50 MA.
However, the overall trend for the EUR/CHF is seemingly bearish, and we could potentially see a revisit to the key resistances below 0.97000.
One strategy traders might consider is to try to catch the minor downside price action in the smaller timeframes rather than shorting the whole way down.
To implement this strategy, traders might want to look for overbought and oversold zones in the RSI and the CCI (Commodity Channel Index) which can indicate trend reversals.
The CCI is an oscillating indicator which measures the price difference between an instrument’s current price and its moving average (MA) and the standard deviation of the moving average. The CCI settings used in the above chart makes use of a 20-candlestick time period, which is a standard time frame for the CCI. The periods of 30 and 40 are also frequently employed in the CCI since they produce a less volatile indicator of price movements.
The CCI can be used to spot overbought and oversold conditions which is why it can be paired with the RSI for confirmation of this condition. Typically, the CCI is an ideal indicator for predicting the next swing as it registers faster than the RSI and divergences are more easily spotted. Initially, you would want to find divergences between the price action and the CCI, with the RSI used for the final confirmation.
At its current price, after knocking off the 0.97000 support level, the CCI is pointing to the EUR/CHF being in a highly overbought condition. This perspective is in the 4-hour time frame. The RSI is a little less adamant on this note, so entering a short position might be too early.
Eurofranc
Swiss franc reaches parity with euro: 0.98 next? The euro-Swiss franc ( EUR/CHF ) exchange rate is in the spotlight today as the pair returned to hit parity for the second time since early March.
The eurozone's worsening economic outlook continues to push ( EUR/CHF ) lower, and the market appears to be giving more credit to the Swiss National Bank's (SNB) ability to continue rising rates to curb inflation.
Yesterday, GfK's consumer confidence index for Germany predicted a drop from -26.0 to -27.4 in July, a new series low, while today German inflation in June jumped to 7.6% year on year (y/y), albeit to a lesser extent than anticipated (8% y/y).
However, the beginning of the euro's bearish phase versus the franc was triggered by the SNB's unexpected half-percentage-point increase in interest rates on June 14, when the market expected rates to remain unchanged.
It was the SNB's first rate rise since 2007, after maintaining the rate at a record low of -0.75 percent since 2015, and it signalled a significant shift in monetary policy. It also communicated to the market that the SNB is ahead of the ECB in terms of rate hikes. SNB Chairman Thomas Jordan stated that more monetary policy tightening will be required to return inflation to the central bank's objective of 2%.
This made the franc the best-performing major currency in June, appreciating versus the greenback ( USD/CHF ) as well.
Technically speaking, the EUR/CHF pair entered oversold territory as the 14-day relative strength index (RSI) dropped below the 30 level mark. The MACD indicator is not signalling a bottoming out.
This fresh drop to parity level in EUR/CHF does neither reflect a bullish divergence, as the RSI is updating new lows simultaneously with prices, nor a bullish reversal after a double bottom, since the neckline technical figure is absent in the chart.
The next EUR/CHF support level is now at 0.98, which was reached at the end of January 2015.
Idea written by Piero Cingari, forex and commodities analyst at Capital.com