EURCHF is currently building a downtrend after a strong rally between July 25 and August 4, which drove the pair to a 2 ½ – year high of 1.1536. Since then, the pair has corrected lower despite making an effort to gain ground on August 4-8. The bias has turned bearish but a trend reversal is likely to emerge.
The short-term bias according to the technical indicators is bearish with a potential shift to the upside. The MACD has entered a negative territory below its signal line, while the RSI is currently located in oversold area, hinting that a trend reversal might occur. Additional evidence comes from the pair crossing below the 50-4-hour exponential moving average (EMA) and the Kijun-sen trending above the Tenkan-sen since August 8.
Should the pair head up, an immediate resistance could be provided by the 38.2% Fibonacci level of 1.1333 of the upleg from 1.1006 to 1.1536 (July 25- August 4). From here any further increases would meet the 23.6% Fibonacci of 1.1410, while steeper upside movements would target the 2 ½ -year top of 1.1536.
Alternatively, if the price moves down, support is likely to be found first at the 50% Fibonacci mark of 1.1271 which was also an intraday low. Next, the 61.8% Fibonacci of 1.1208 could stand a second barrier to downside movements, whereas if support at this level fails to hold, the price would likely meet the 78.6% Fibonacci of 1.1119.
