The EUR/CHF pair broke higher during the course of the session on Friday, testing the 1.05 handle. This is an area that has been massively resistive and supportive in the past, so the fact that we pullback should not be much of a surprise. I think that if we can break above the 1.05 level, we could very easily go to the 1.08 level. I think that a pullback is probably coming, but it is starting to look like the Euro is finding support around the world. With that, this pair should go higher given enough time. It’s also possible that the volatility comes into play for several weeks, as this pair tends to grind for long periods of time and then suddenly takes off.
I have no interest in selling this pair, because I believe that the Euro has bottomed out in general. While this particular pair is a bit different than some of the other ones, and there is most certainly quite a bit of volatility due to the fact that it was “Ground Zero” of the Swiss National Bank move, the truth of the matter is that the Euro has been sold off far too drastically in general.
Buying dips
I am buying dips in this pair going forward, as I believe we will eventually hit the 1.08 level. Once we break above there though, I feel that this market could go all the way back to the 1.20 level as the Euro is extremely undervalued when it comes to other currencies, especially the Swiss franc. After all, the Swiss are in the same boat as the Europeans, and as long as the European economy is fairly soft, so will the Swiss economy be.
If we were to fall below the 1.0250 level, I think at that point in time we would go back down to the parity, but do not expect that to happen. I believe that with the bullishness that we are starting to see with the Euro and other currency pairs, it should translate into this one.
