By: Doug Rosen
As usual, I start out my analysis for this pair by first analyzing the EUR/CHF then the GBP/CHF. This is how I determine relative strength between the EUR and the GBP.
Starting out with the EUR/CHF weekly chart it is obvious we have not yet broken the descending trend line I have been commenting on for the last few days. This line holds much significance to me since it has been tested three other times in the past but not broken.
What makes this time different than previous times is that we have a wide angle and separation between the ema's and an open Bollinger band pointing up. The only thing that bugs me is the stochastics in the overbought zone, but, even though I do watch the stochastics, I am not religious to it. The ema's on the weekly have a bullish tone and a stochastics int he overbought zone is not going to change that.
Moving over to the daily the angle and separation between he ema's have narrowed a bit, but it is still very possible these ema's could give price a boost above the trend line. The ema's could always roll over tot he down side and force price to break below the ascending trend line and since the stochastics is in the overbought zone this is not improbable.
The 4 hour and 1 hour charts for this pair just display a consolidation range. Moving on to the GBP/CHF weekly chart it does appear that the GBP/CHF is having a bearish reaction to the descending trend line and that the stochastics is in the overbought zone. Moving over to the daily chart I see that the 5 ema is looking like it wants to cross below the 13 looking like it wants to force price below the ascending trend line which can cause a bearish breakout.
Looking at this pair on a 4 hour chart it already appears an ascending trend line has already been broken. Taking all this into consideration before I even look at the EUR/GBP charts I already know which is stronger and which is weaker. The EUR is the stronger currency. So now I move on to the EUR/GBP chart and my analysis so far is confirmed.
The weekly candle has busted above a descending trend line and the stocastics is crossing up out of the oversold zone and the 5 ema is pointing upward and beginning to cross the 55 ema and it looks like it can soon cross the 13 and 21 ema's as well. Moving over to the daily chart it is very obvious that we have broken and retested the descending trend line and is already heading back up. The 5 ema has crossed above the 55 and 233 and heading north. Stochastics is pointing straight up as is the upper Bollinger band. Still, a horizontal resistance line exists at 0.8788 so we must break that level before I will be convinced we are in a breakout.
Looking at the 4 hour price is riding the 5 ema and we have busted lasted months high. Moving over to the hourly chart much the same, riding the 5 ema, last week's high has been busted and the upper Bollinger band is opening and pointing up and the stochastics is in the trade zone pointing up.
As I write this analysis I see price hitting the daily M3 pivot point and I know this will be the pullback zone to enter a long. In any case, this pair is bullish, the meaning the EUR is stronger than the GBP and this is very important information for trading the EUR/USD and the GBP/USD.