EUR/CHF Forecast January 28, 2016, Technical Analysis

The EUR/CHF pair initially fell during the day on Wednesday but then shot well above the 1.1050 level in order to break out significantly in our opinion. We believe that this market is now free to go all the way to the 1.20 level, as the market had recently fell drastically from that area due to the currency peg been lifted buying the Swiss National Bank. Now that we have all of this “dead air”, it’s likely that the buyers will become very aggressive, as the Swiss National Bank is more than likely find the scenes pushing this pair higher.
If the Euro can find its footing in other currency pairs, this pair will absolutely rocket higher. The Swiss franc has been soft in general, mainly because of the European Union and its problems. However, with the negative real interest rates in Switzerland, that of course continues to make money flow away from that particular country, which devalues the currency. The Swiss certainly appreciate this, as the Swiss franc has been overvalued for quite some time.
Pullbacks at this point in time should have plenty of support, probably extending all the way down to the 1.09 level. On a pullback, we simply wait for a supportive candle such as a hammer and start buying again. However, we believe that it is going to be very unlikely that we see something like this in the short-term, at least for any real significant move. We believe the most pullbacks that are bought will probably be done so from short-term charts rather than long-term ones.
While there will be pullbacks from time to time, they will simply be opportunities to reload on long positions. We believe that the 1.15 level obviously be resistive due to the large, round, psychologically significant nature of the number, but that area isn’t necessarily significant from a longer-term perspective. There is no scenario in which we are sellers, at least not above the 1.09 level. Ultimately, we believe this will be one of the better trades this year as it seems to be such a no-brainer.