Preparing for the Central Banks’ Meetings
On December 14, 2017, the meetings of the European Central Bank and the Swiss National Bank are expected. No changes in rates are expected. Will the EURCHF quotes decrease?
A downward movement occurs in case of the weakening of the euro and the strengthening of the Swiss franc. Previously, EURCHF updated the 2-year high. A downward correction is possible on the background of an increase in the Swiss economy by 1.2% in the Q3 of 2017. No changes in the Swiss National Bank (SNB) rate are expected, but in the future the latter may make some statements about the tightening of the monetary policy. The SNB rate is negative and amounts to -0.75%. At the same time, in annual terms the inflation in November of this year was positive: it updated the high since March, 2011 and reached 0.8%.
On the daily timeframe, EURCHF: D1 remains in the rising trend. Its price growth has slowed down and some technical analysis indicators have formed bearish signals. A downward correction is possible in case of the publication of negative economic and corporate information in the eurozone and positive information in Switzerland.
- The Parabolic indicator gives a bearish signal.
- The Bollinger bands have narrowed, which means lower volatility. They are tilted down.
- The RSI indicator is below 50. It has formed a negative divergence.
- The MACD indicator gives a bearish signal.
The bearish momentum may develop in case EURCHF drops below the last fractal low and the lower Bollinger band at 1.1594. This level may serve as an entry point. The initial stop loss may be placed above the two last fractal highs, the 2-year high, the upper Bollinger band and the Parabolic signal at 1.1744. After opening the pending order, we shall move the stop to the next fractal high following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level at 1.1594 without reaching the order at 1.1744, we recommend cancelling the position: the market sustains internal changes that were not taken into account.
Summary of technical analysis
|Sell stop||below 1,1594|
|Stop loss||above 1,1744|
Market Analysis provided by IFCMarkets