Short-term pips may be up for grabs in EUR/CHF as the pair breaks a support area on weak global risk sentiment and European PMI data.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/USD ahead of the latest PMI data, so be sure to check that out to see if there is still a potential play!
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Fresh Market Headlines & Economic Data:
- March’s ISM manufacturing index is 49.1, signaling contraction as coronavirus hits economy
- Trump warns of ‘painful’ two weeks ahead as White House projects more than 100,000 coronavirus deaths
- US companies cut 27,000 jobs before the worst of the coronavirus shutdown, millions more coming, ADP says
- White House is not planning for a 4th coronavirus relief bill despite Democrats’ push, officials say
- IHS Markit final U.S. Manufacturing PMI posted 48.5 in March vs. 50.7 in February
- IHS Markit Canada Manufacturing Purchasing Managers’ Index dropped from 51.8 in February to 46.1 in March
- Germany Manufacturing PMI: Output falls at fastest rate for nearly 11 years amid escalation of COVID-19 crisis
- Eurozone manufacturing economy contracts sharply in March to 44.5
- Fastest deterioration in French business conditions since January 2013
- German Retail sales: +1.2% on the previous month (in real terms, calendar and seasonally adjusted, provisional)
- UK manufacturing output and new orders fall at quickest rates since mid-2012
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- U.S. Vehicle sales at 11:00 pm GMT
- Japan Foreign investment at 11:50 pm GMT
What to Watch: EUR/CHF
Global risk sentiment swung back towards negative on the session, thanks to more negative coronavirus updates, most notably Trump’s warning of ‘painful’ two weeks ahead. This had forex traders jumping back to “safe havens,” a title the euro couldn’t claim on this day as European PMI data came out very, very bad.
This is forming a potential short-term setup on EUR/CHF, which seems to be trying to break below a support area formed around 1.0570 handle over the past couple of days.
Right now the signal isn’t clear whether to go short or not, so if you are a bear on the pair, it’s probably best to wait for a fresh move lower before considering a short. This lowers the potential return-on-risk if target the next support area around 1.0530, but the trade off is you may not miss the move lower if it happens.
For the more conservative bears, a bounce from here up to the falling trendline is a safe entry strategy and gives a far better potential return-on-risk, but the risk is definitely much higher of missing the trade if the longer-term trend lower continues without the pullback.
For the bulls, there’s really no argument for that position at the moment, other than some big shift in risk sentiment in the next few hours, likely to be a very positive update in the coronavirus story and/or another massive stimulus move from one of the world’s major central banks. That’s a very low probability scenario at the moment, but if it does play out, look for a break above the falling trendline for a potential buy signal for a swing trade type position.