Today’s Trading Edge: EUR/CHF – 4-week high forms ABCD Pattern

WWM EURCHF APR 29 2015

The Swiss franc fell to its lowest level in a month against the euro, possibly forming both a bearish ABCD and double-top pattern.  The euro remained strong early in New York as optimism grows that Greek government officials are on the verge of reaching an agreement.

The bearish bias for the currency pair may continue towards the monthly low 1.0234 level.  While we may see a short-term rally from any agreement restructuring Greece’s debt, the euro could remain vulnerable as ECB monetary policies appear firmly in place for the next year.

The 4-hour EUR/CHF chart shows both the formation of a potential double-top and bearish ABCD pattern.  Point D of the ABCD pattern is targeted by the 161.8% Fibonacci expansion level of the B to C leg.  If the bearish reversal continues, key support will come from the 1.0425 level.  Deeper support may come from the 1.02 handle.  It is around that level that the Swiss National Bank might become nervous that their currency is once again appreciating too quickly.

To the upside, the bearish ABCD will remain in play as long as we do not see a daily close above the 1.0545 level, which is both the medium-term bearish trendline and the 200.0% Fibonacci level. If invalidated, further gains could target the 1.0650 region.

The trade: Sell EUR/CHF 1.0495, with a stop loss at 1.0555 and take profit at 1.0315.  The risk/reward ratio is 1:3

 

Edward J. Moya

Senior Market Strategist

WorldWideMarkets Online Trading

Edward J. Moya is the Chief Market Strategist for edmoya.com, an educational website for foreign exchange and commodity traders. He has over 15 years of investment industry experience in forex, stocks, options and futures. At edmoya.com, Mr. Moya writes daily currency and commodity analysis and has authored numerous articles on trading using both technical and fundamental analysis for major financial publications. He is a contributor of technical and fundamental analysis in currencies and commodities to SFO, Market News International, and Forex Factory.

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