By: Mike Kulej
During the last month, the Swiss Franc made large advances against most of the other major currencies. No other Franc pair exemplifies it better than the EUR/CHF. Following the announcement from the Swiss National Bank, that it would no longer intervene in open market, this cross fell about 1000 pips within few weeks, a very large move.
The price has been dropping with increased speed, creating a parabolic like trend, something that is not sustainable for an extended period. Chances are that a sharp correction is about to take place. On a weekly chart, we can see that last candlestick closed way off its lows, forming a possible reversal pattern. After making an all time low at 1.3070, this pair closed at 1.3350 for the week. The ADX indicator has stopped rising, even though the price kept accelerating down. On the other hand, the ATR reading simply exploded, showing massive volatility. All that is consistent with the market reaching a likely turning point.
On Thursday, the SNB was rumored to have intervened against the Franc, in spite of supposedly shelving this policy a month ago. Later more comments from the bank’s officials revealed a “renewed concern about excessive currency fluctuations”. This also should support a possible trend reversal in the EUR/CHF.
