By: Mike Kulej
A combination of a very strong Swiss Franc and an extremely weak Euro made for a very powerful trend in the EUR-CHF currency pair. It has been moving down for months, making new all time lows along the way – seemingly one after another. The latest all time price extreme was 1.2399, established just two weeks ago.
Since then the EUR-CHF has consolidated, rebounding a little bit. So far, it does not look very promising for the bulls, but a close inspection suggests that this pair could stage a rally from these levels. Those who are optimistic enough might even find a major reversal here.
On the weekly chart of the EUR-CHF, candlesticks are forming a possible reversal pattern. The strong bearish candlestick, which made the new low, was followed by a doji (some could see it as a morning star), creating the first part of a reversal pattern. The current week is forming a strong bullish engulfing line, which, if closes strongly, will complete the pattern. This would signal an increased probability of a major turn change.
Other technical indicators support this possibility. Virtually all oscillator type indicators are in divergence with the price, as seen on the MACD and the Momentum indicators. Put together, the picture for the EUR-CHF is more bullish than bearish, if the current candlestick closes strongly up.