EUR/CHF Breaks Above Channel With SNB Intervention Watch On

The EUR/CHF market is on it’s way to the first re-test of the 1.20 floor. This is the level the Swiss National Bank has pledged to ‘defend’. The EUR/CHF has been persistently bearish since falling from the 2012 high near 1.2470 and since Jan. 25th has been trading in a declining channel seen in the 1H chart. A bullish divergence developed over the past couple of sessions, and the 2/2 Asian session resolved it with a rally above the channel resistance. The RSI has also climbed back above 60 and is about to tag 70, which would reflect bullish momentum and is an initial sign of bottoming.

A look at the 4H chart however shows that the market has actually been trading in a larger downward channel. Also the RSI here shows persistent bearish momentum as the reading has shown inability to rise above 60 since Dec. 16 2011. Therefore, if this current corrective rally extends to 1.2080-1.21 area, we can see the first test of bearish strength. A break above the channel and 1.21 then sees an immediate pivot zone right under 1.2130. The ability to clear that then opens up 1.2240, especially if the RSI also rises above 60.

Therefore in going with the trend, it can be said that the market continues to have downward pressure, and a rally toward 1.21 can provide the market with another chance to fade toward 1.20 to test the SNB floor. It seems like the market wants to know whether the interim replacement for the disgraced ex-chairman Philipp Hildebrande, Thomas Jordan will provide intervention against the strong Swissie as the EUR/CHF nears 1.20.

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