Two weeks after the Swiss National Bank stunned markets by abandoning its attempt to defend the 1.20 peg and one week from when the ECB launched its QE program, it appears that price has normal volatility and liquidity. The widespread selling that occurred on that historic SNB decision saw EUR/CHF record low of 0.85172 before settling around 1.03. Leading up to the ECB decision, the currency pair slid towards parity before bottoming out around the .9770 region.
Price action on the EUR/CHF 60 minute chart shows that the recent rally may have formed a bearish ABCD pattern. Point D may have been confirmed overnight with the 141.4% Fibonacci expansion level of the B to C leg. In the event we see one last move higher, the pattern may sustain a move towards 1.0576. If valid, we could see price drop towards the 1.04 handle, with deeper support coming from the 1.0350 region.
In the event short covering continues and the pattern is invalidated, key resistance will come from the 1.0650 level.
The trade: Sell EUR/CHF at 1.0450 with a stop loss at 1.0505 and a take profit at 1.0350. The Risk/Reward Ratio is 1:2.
Edward J. Moya
WorldWideMarkets Online Trading