We have tons of Euro Zone PMIs on tap today, so I thought I should check out EUR/CHF’s downtrend over the next couple of hours. What do you think of the setup?
Fresh Market Headlines & Economic Data:
- Higher airfares and rents boost New Zealand’s inflation
- Australia’s business activity down for third month running
- Japan’s December consumer inflation ticks up, but still short of BOJ’s 2% target
- Slowing contraction in Japan factory activity eases fears of recession
- Minutes: gloomy economic outlook overshadowed BOJ’s December meeting
- Euro near 7-week low after ECB; virus fears support yen
Upcoming Potential Catalysts on the Forex Calendar:
- France’s flash PMI reports at 8:15 am GMT
- Germany’s flash PMI reports at 8:30 am GMT
- Euro Zone’s flash PMI reports at 9:00 am GMT
- U.K.’s flash PMI reports at 9:30 am GMT
- ECB’s Lagarde, BOJ’s Kuroda, and U.S. Treasury Secretary Mnuchin to participate in “Global Economic Outlook” panel discussion in Davos at 9:30 am GMT
- Canada’s November retail sales at 1:30 pm GMT. Read Forex Gump’s event preview if you haven’t yet!
What to Watch: EUR/CHF
Earlier today we saw NZD gain against USD after New Zealand printed much better inflation numbers.
Meanwhile, Lagarde’s surprisingly dovish presser from the U.S. session spooked EUR bulls and this anti-EUR sentiment carried over to the Asian session. Last but not the least, the economic impact of a coronavirus epidemic has kept safe haven bets like JPY supported.
I’m aiming to take advantage of the last two economic themes through EUR/CHF’s downtrend. The pair looks like it could retrace to the 1.0740 levels, which lines up with a trend line retest, broken support, and Fibonacci retracement on the 1-hour time frame.
MarketMilk also suggests that EUR/CHF remains “bearish” with the long-term moving averages on the 1-hour time frame even as it’s currently “bullish” in the short-term.
Today’s PMIs could provide the necessary volatility for the pair. Markets are generally expecting stronger numbers from the previous releases, so EUR could have a bigger reaction to disappointments. Another rejection of the trend line, or a new weekly low for EUR/CHF, could send the pair to the 1.0650 or 1.0630 previous areas of interest.
If we do see better-than-expected numbers from today’s PMI releases, however, then EUR/CHF’s defined downtrend would make it easy to spot strong breakouts. A break above the 50% Fib, trend line, and 200 SMA could make way for a move back up to the 1.0790 or 1.0830 areas.