CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

EURCHF stirring and reversing

May 20, 2020 2:50 AM

In recent months we have published a handful of notes and videos on the Euro currency, against the U.S. dollar and on some cross rates, such as EURCAD and EURAUD. In all, we have been advocates of Euro strength.

While the jury is still out on EURCAD and EURAUD, this week the EURUSD launched a rebound from its 20 year, long term trendline support and specifically from the 1.0770/60 region, that halted declines in April and February of this year.

One of the key catalysts behind this week’s EURUSD’s rally was a joint press conference where German Chancellor Angela Merkel and French President Emmanuel Macron proposed a €500bn Recovery fund to support the regions worst hit by COVID-19.

The proposal outlines that funds raised via the market will be distributed to member states via grants. The member states would not be required to repay the grants. Instead, the grants would be repaid via revenues of the EU budget.

This has been met with opposition from member states including Austria, Denmark, the Netherlands, and Switzerland who prefer loans as opposed to grants. However, at the core, the proposal is viewed as a first step towards fiscal union - the lack of which has been a key problem weighing on the Euro since inception.

In terms of how FX markets might respond should the Franco-German proposal gain traction, moves this week in EURUSD and EURCHF provide an insight.

As can be viewed on the chart below EURCHF has been well supported ahead of 1.0500 in recent months and there are signs of bullish divergence via the RSI indicator. Additionally, the rally on Monday above the April 1.0612 high, ends the recent pattern of lower highs and lower lows and is a preliminary sign that a recovery is underway.

Further confirmation would be a break and close above resistance 1.0655/70 area that would then allow a stronger recovery towards the highs of late 2019, 1.1035/55 area. Keeping in mind, if EURCHF was to break/close below the 1.0500 support zone, it would be negate the prospects for a recovery.

Source Tradingview. The figures stated areas of the 20th of May 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024