Sun, June 16, 2024

EUR/CHF Tests Annual Highs with 17-Pip Gain

Wibest – Franc: Euro and Swiss franc (chf) coins and bills.

Quick Look:

  • EUR/CHF is nearing annual highs with a 17-pip gain today, close to surpassing a significant technical level.
  • Europe’s economic improvement and Swiss rate cuts support the EUR/CHF, driven by policy divergence.

The EUR/CHF currency pair has been making headlines as it tests the highest levels seen this year. With a gain of 17 pips today, the pair is on the brink of surpassing a double top, which would mark a significant technical breakout.

EUR/CHF Gains 17 Pips, Tests Double Top

The euro threatens to break out past critical resistance levels, testing highs in April and May. If this momentum continues, the EUR/CHF could trade at its highest level over a year, signalling a robust upward trend.

Several factors underpin this potential breakout. Europe’s economy is gradually improving, boosting investor confidence in the euro. Meanwhile, the Swiss National Bank (SNB) has been leading with rate cuts, a policy stance that contrasts with the broader move towards pre-pandemic norms in inflation and growth.

This divergence in monetary policy could lead to even lower rates in Switzerland, particularly if the eurozone continues to maintain relatively low rates. Such a scenario could further support the EUR/CHF pair as capital flows seek higher yields outside Switzerland.

Diverging Policies: Europe Improves, SNB Cuts Rates

Before the pandemic, the EUR/CHF traded around the 1.08 level. As the eurozone’s economic stability improves, there’s potential for the pair to rise above parity. This would likely be driven by a reallocation of funds from Switzerland, spurred by an improving global economic environment.

The recent rally from 0.9252 has resumed, pushing through the resistance at 0.9847. Currently, the intraday bias remains on the upside, targeting the 61.8% projection from the move of 0.9304 to 0.9847, projected from 0.9563, which stands at 0.9899. Furthermore, a decisive break above this level could accelerate gains towards the 100% projection at 1.0106. Notably, key structural resistance is slightly above this point, around 1.0095. The outlook remains bullish as long as the support at 0.9728 holds.

Bullish EUR/CHF Outlook as 0.9563 Support Holds

From a broader perspective, the bullish outlook for the EUR/CHF pair persists as long as the 0.9563 support level holds. The rise from the medium-term bottom at 0.9252 is expected to continue. Breaking the 0.9847 resistance targets a 38.2% retracement of the long-term downtrend from the 2018 high of 1.2004 to the 2023 low of 0.9252, aiming for 1.0303. This movement is viewed as a correction within the larger downtrend that began in 2018.

The EUR/CHF pair is at a critical juncture, testing significant resistance levels with the potential for a substantial breakout. Economic improvements in Europe and contrasting monetary policies between the eurozone and Switzerland are key drivers behind this momentum. Market participants will closely watch for sustained bullish momentum as the pair navigates these levels.

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