Over the past four weeks, the EUR/CHF cross pair has experienced a significant rally, bouncing back from losses incurred between 10 June and 19 June. This initial decline was triggered by political uncertainties surrounding the abrupt announcement of a French legislation snap election by President Macron on 9 June. As a result, the currency pair rallied by 295 pips or 3.10%, reaching an intraday high of 0.9774 on 15 July, coinciding with the 2nd round of the French legislation election on 7 July.
Market Performance Analysis
A closer look at the three-month rolling performance of major stock indices including the French CAC 40, German DAX, UK FTSE 100, US S&P 500, and US Nasdaq 100 reveals a worrisome trend. While the French CAC 40 has experienced a loss of -5% post the 2nd round of the election, it has significantly underperformed compared to its counterparts. The current weakness in the French market appears to have a cascading effect on the EUR/CHF, evident in the increased correlation coefficient between the two entities.
Technical Analysis and Market Outlook
The recent rally in EUR/CHF has encountered a major obstacle in the form of a key resistance level at 0.9780. This level aligns with the former medium-term ascending channel support and the 61.8% Fibonacci retracement, signaling a potential reversal. Additionally, indicators such as the weekly MACD trend and the 4-hour RSI momentum point towards a bearish outlook for the currency pair. Failure to surpass the 0.9780 resistance may lead to a decline towards the 0.9680 support level, with further downside targets at 0.9600 and 0.9480. Conversely, a breakout above 0.9780 could negate the bearish bias, opening up opportunities for upside movement towards intermediate resistance levels at 0.9840 and 0.9925.
The EUR/CHF faces impending weakness as a result of the ongoing troubles in the French CAC 40. The political uncertainties and market reactions have set the stage for a potential downturn in the currency pair, with key resistance and support levels signaling a bearish momentum. Traders and investors should closely monitor the developments in both the political and market spheres to navigate the volatility and make informed decisions in the face of uncertainty.
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