- EURCHF trades in a tight range
- The medium-term bearish trend is still valid
- Momentum indicators prepare for the next leg
EURCHF is edging higher today, testing the resistance set by both the 0.9394-0.9403 area and the May 27, 2024 downward slopping trendline. EURCHF has been trading in a tight range over the past few sessions, inside the developing contracting triangle pattern, as the bulls have failed to materially benefit from a barrage of positive euro area data.
This reduced volatility is reflected in the momentum indicators, which remain mostly directionless. In more detail, the RSI continues to aimlessly hover around its midpoint, without any desire for a more forceful move. Similarly, the Average Directional Movement Index (ADX) is dropping towards its midpoint and thus points to a trendless market in EURCHF.
More importantly, the stochastic oscillator is preparing to test the support set by its moving average (MA). A bounce higher could reveal a buildup of bullish pressure in EURCHF, while a break below its MA could open the door to a sizeable downleg in EURCHF.
If the bulls remain confident, they will try to push EURCHF above the busy 0.9394-0.9403 area, which is populated by the September 26, 2022 low, the 50-day simple moving average (SMA), the May 27, 2024 descending trendline and upper boundary of the contracting triangle. A move above the 0.9452-0.9480 region could validate the bullish breakout with the next resistance expected at the key 0.9552-0.9583 area.
On the flip side, the bears are trying to protect the May 27, 2024 trendline and push EURCHF back inside the contracting triangle. They could then stage a selloff towards the lower boundary of this pattern, aiming to finally record a bearish breakout that spans over the next few sessions. If successful, the bears could then have the chance to target the December 29, 2023 low at 0.9253.
To sum up, EURCHF bulls are trying to break the current range trading and stage a bullish breakout towards the 0.9452-0.9480 area.
Source by: XM Global