Possible MACD Divergence in EUR-CHF

By: Mike Kulej

In the wake of the sovereign debt crises in Europe, the common currency has been under serious pressure lately. This is especially true in relation to the US Dollar and, even more so, against the Swiss Franc. In fact, the EUR-CHF made a new all time low on Wednesday, at 1.2757.

The previous extreme of 1.2765 was reached in September. Since then, the price rallied strongly, climbing to as high a 1.3833. Just as it seemed that EUR-CHF made a long-term trend reversal, the price started to fall again. There was a red flag concerning the possible bullish trend – failure to breach the preceding high of 1.3933, always a necessity when a major trend change is concerned.

However, even though the EUR-CHF made a new low, it does not mean that the down bearish trend will continue much further, at least not immediately. The price has not closed under the old low while the MACD indicator has formed a possible divergence with the market.

The divergence itself does not guarantee a trend reversal, but suggests and indecision most likely resulting in a correction, which, in turn, could lead to a bullish trend change. For that, a reversal candlestick pattern is needed and the sooner, the better. We should find out during the next 1-3 days what the EUR-CHF is going to do.