- The EUR/CHF has fallen during the trading session on Thursday as the European Central Bank raised interest rates by 75 basis points.
- This was expected, so it’s not a huge surprise that we have seen the Euro fall.
- This is especially true considering that the press conference did little to clarify the situation other than Christine Lagarde stating that the ECB will be “data dependent” on how many more interest rate hikes there going to be.
That being said, it leaves open the possibility that the ECB will not be raising rates aggressively, as the economic outlook for this winter is going to be horrible for the European Union. Anytime you have a large economy that is somewhat limited in its energy production, you are going to have a lot of problems. The EU also has seen a bit of fracturing as of late, as the French refused to let a pipeline go through their country, while the Spanish tend to get natural gas from North Africa. In other words, it can be very difficult for the ECB to juggle all the moving pieces at the same time, as some parts of the continent will be running out of gas, while others will have plenty.
Look at Short-Term Rallies as Selling Opportunities
The 50-Day EMA currently sits around the 0.98 level and should offer a certain amount of dynamic resistance. It is because of this that I believe short-term rallies are selling opportunities, especially as we have been in such a negative downtrend. Keep in mind that a run towards Switzerland is the same thing as running toward safety in this currency pair. I believe you will continue to see that, although it’s probably worth noting that the Swiss economy is not completely independent of the European one.
The market bouncing the way it has as of late was something that was needed, but there’s nothing on this chart that suggests we should continue to go higher for any significant amount of time. In fact, we would probably need to get above the parity level for the Euro to be something that I might go long on against the Swiss franc. The 0.97 level has offered a little bit of short-term support, but it would not surprise me at all to see this pair dripped down to the 0.96 level over the next several sessions.
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