By: Mike Kulej
The Euro and the Swiss Franc pair has been very indecisive lately. It seems that every 2-3 weeks it changes direction, without establishing a lasting trend. For all practical purposes, the EUR-CHF is moving sideways on the daily chart inside an 850 pips wide congestion zone.
There are a couple of possibilities here. Since the EUR-CHF had been in a long term down trend, the current consolidation could just be a pause before that trend resumes. On the other hand, we could also have a major reversal forming. So, what is it?
If we look at this chart considering only the price action, a potential reversal has a slight edge over continuation. This pair made an all time low at 1.2399, followed by a rebound to 1.3204. After that, the EUR-CHF tested the low again, but reached only 1.2409, while the next top was at 1.3241. The price makes higher highs with higher lows (if barely), suggesting a possibility of an uptrend.
On Tuesday, the daily candlestick formed a bullish engulfing line. In the context of this chart, that could mean the start of a rally to at least the most recent high, and eventually, much farther, although not necessarily immediately. It often takes time to form a major reversal, just like the one we might be witnessing in the EUR-CHF.