Earlier in September, EUR/CHF formed a bullish Butterfly pattern that is displayed on the weekly chart. Price has been especially bullish over the last five trading days after recapturing the 50-day Simple Moving Average (SMA). The critical support level of 1.20 is also the current peg for the currency pair. This level is widely anticipated to be defended by the Swiss National Bank.
Another major wave of euro weakness across the board of majors is expected once we start seeing the next round of quantitative easing money flow through the European economy. The daily chart is currently displaying a potential bearish Gartley pattern that may form around the 1.2148 level, which is the X to A leg’s 78.6% Fibonacci retracement and the B to C leg’s 141.4% Fibonacci expansion level. Important resistance will also come from the 200-day SMA which currently trades at 1.2175. If we see a daily close above this level, we will look for further upside to be capped the 1.2200 handle.
Will the 1.20 peg be breached? It is possible, but the better trade may be to trade the 1.20 -1.23 range.
The trade: Sell EUR/CHF at 1.2148 with a stop loss at 1.2188 and a take profit at 1.2068. The Risk/Reward Ratio is 1:2.
Edward J. Moya
WorldWideMarkets Online Trading