EUR/CHF entered a steep rally mode on Monday, when it broke above the upper bound of the falling wedge formation that contained the price action since June 11th. Yesterday, the advance was stopped fractionally below the 1.0800 barrier, with the rate beginning a corrective slide. That said, despite the retreat, as long as the pair continues to trade above the upside support line drawn from the low of July 9th, we will hold a positive stance.
The current setback may continue for a while more, perhaps until the rate tests the 1.0733 support, or the aforementioned upside line. The bulls may take charge again from near those zones and perhaps pull the trigger for another test near the 1.0800 area. If they are strong enough to overcome it this time around, we may see extensions towards the high of June 9th, at around 1.0830.
Looking at our short-term oscillators, we see that the RSI exited its above-70 zone, and is now pointing down, perhaps headed towards its 50 line. The MACD, although positive, lies below its trigger line, pointing down as well. Both indicators detect declining upside momentum and support the notion for some further correction before, and if, the bulls decide to take the reins again.
Now, in order to start examining the bearish case, we would like to see a clear drop below Wednesday’s low, at 1.0700. The rate would be already below the pre-discussed upside line, something that may encourage the bears to push towards the Tuesday’s low, at 1.0650. Another break, below 1.0650, could extend the fall towards the 1.0615 zone, which provided decent support between July 1st and 8th.
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