EURCHF is hovering around the 0.9790 area, having recorded a good move since the March 31 high of 0.9989. It is trading well inside the wide 0.9741-1.0006 rectangle that has dominated price action since October 13, 2022, but EURCHF is closing in on the lower boundary for this structure. EUR bears may enjoy another bearish breakout, but the overall technical picture is not on their side at the moment.
The Average Directional Movement Index (ADX) is trading at the highest since the significant September-December 2021 downleg. This means that a sideways move or a dip in the ADX would result in a pause in the current bearish move. It could get even worse for EUR bears as the stochastic oscillator is sending a double message. A bullish divergence has formed as the higher low in the EURCHF has been matched with a lower low in the stochastic. In addition, this indicator is hovering at its oversold area and hence a break higher would offer the EUR bulls sufficient evidence to take over the market reins.
Should this be the case, EUR bulls would have to overcome the 0.9823-27 range first. This is defined by the 200-day simple moving average (SMA) and the 38.2% Fibonacci retracement of the June 9, 2022 – September 26, 2022 downtrend respectively. Higher, the 50- and 100-day (SMAs) at the 0.9886-0.9899 area could prove tougher to crack.
On the other hand, the bears would have to deal with the 0.9741 level first, the lower boundary of the current rectangle. If successful, the November 14, 2022 low at 0.9706 appears to be a stronger support area, as seen at the mid-March breakout. Even lower, the 0.9650-0.9665 range, set by the January 15, 2015 low and the 23.6% Fibonacci retracement, could be targeted.
To sum up, EURCHF bears would prefer a continuation of the current short-term bearish move. However, strong evidence points to a sideways move, and potentially a reversal, soon.
