EUR/CHF Outlook: Rally to Provide New Selling Opportunity

The EUR/CHF is trading 0.47% higher this Tuesday as it aims to recover from its recent steep drop following current SNB-induced Swissy strength. The steep decline seen in the EUR/CHF was prompted by the 50bps rate hike by the Swiss National Bank last Thursday.

The move made the CHF an attractive safe-haven asset once more and was the product of an attempt by Switzerland’s apex bank to arrest soaring inflation that had hit 14-year highs. The SNB has historically tended to be dovish, often intervening to keep the Swiss Franc weaker to promote Swiss exports.

But soaring inflation after years of stimulus has flipped the script, and the SNB has indicated that it is ready to raise rates later in the year to contain rising consumer prices. Also keeping the CHF softer this Tuesday was the Swiss trade balance data from the Federal Statistical Office. Data showed a trade surplus of 3.12 billion francs.

This print was lower than the market consensus of 3.78 billion francs and also represented a drop from the previous figure of 4.03 billion francs, which was adjusted lower. Technically speaking, Friday’s hammer candle and the doji of Monday provided the technical basis for the upside seen on Tuesday. However, the former support-turned-resistance ay 1.02479 will determine if the recovery continues or if this is a bull trap.

EUR/CHF Outlook

Monday’s violation of the 1.01956 resistance would need to push beyond 1.02479 for the recovery momentum to continue. In this regard, 1.03265 (23 May and 3 June highs) and 1.04013 (7 June low and 13/14 June 2022 highs) would be the additional targets to the north. 

On the flip side, the uptick may be seen as a rally that provides new opportunities to sell into the CHF’s strength. Therefore, if the violation of 1.01956 fails to transcend 1.02479, the 1.00879 support (12 April 2022 low) would be the initial target for the bears, depending on the breakdown of 1.01956. The 6 March 2022 low at 0.99718 serves as an additional target, but not before the bears break down the support at parity.

EUR/CHF 4-Hour Chart