TSX runs higher on rate cut expectations
A sharp reversal in EUR/CHF has been driven by a tariff hit to the franc and growing Fed rate cut bets favouring the euro, leaving the pair testing range highs.
- Tariff hike weighs on CHF sentiment
- Fed cut bets bolster EUR
- Bulllish reversal stalls at .9429 resistance
EUR/CHF Summary
Both fundamental and technical factors likely explain the substantial bullish reversal in EUR/CHF over the past week. On the fundamental side, the announcement of a steep 39% US tariff rate on certain Swiss exports has provided a clear negative for the franc. Efforts by the Swiss president to shift Washington’s stance have so far fallen flat, generating headwinds for Swiss exporters.
At the same time, the price action points to a wider dynamic with the euro seemingly far more sensitive to shifts in the US interest rate outlook than the franc, as demonstrated by the price action following the weak US nonfarm payrolls report last Friday. With market pricing for Federal Reserve rate cuts continuing to build, that relative sensitivity may have provided an additional tailwind for the pair.
EUR/CHF Technical Analysis
Source: TradingView
EUR/CHF sits just beneath the top of the range it’s been trading in over the past three months, providing a variety of potential setups depending on how the near-term price action evolves.
The bullish engulfing candle on the daily chart last Friday set the tone for the price action seen this week, sparking a significant bullish reversal after a false break of .9300 support. The subsequent move saw the price take out resistance at .9363 before stalling at .9429—a level that capped the pair in June.
Given recent price action, traders should be on alert for a potential extension of the bullish move.
Should we see a break and close above .9429, it would allow for longs to be established with a stop beneath for protection, targeting resistance at .9500. Offers may be encountered just beneath .9450, presenting a potential hurdle for bulls along the way.
Alternatively, if the pair cannot break .9429 meaningfully, the setup could be flipped with shorts established beneath the level with a stop above for protection. Potential targets include .9363 or .9300.
Momentum indicators have skewed bullish over the past week, with RSI (14) trending higher but not yet overbought, while MACD has crossed the signal line and now sits in positive territory. It’s not a roaring endorsement for a bullish bias, but it does favour upside rather than downside in the near term.