EURCHF Braces for Inflation Impact

 Amidst a recent spell of downward pressure, the EURCHF currency pair currently hovers at a critical support level, poised to influence the potential emergence of a sustainable rebound from its recent decline.  

The past week saw the currency pair maintaining a relatively flat trajectory as the ECB and SNB chose to leave interest rates unchanged in their respective economies. However, a significant upcoming challenge awaits with the release of Eurozone inflation data later today. Projections suggest a dip in year-over-year inflation from 2.9% to 2.4%, while core inflation is expected to contract from 4.2% to 3.6%. With the anticipation building up to this crucial data release, the unfolding narrative of this widely followed currency pair may yet take another intriguing turn. 


On the 4H chart, a breakdown has occurred from the ascending channel, putting the retracement of the prior selloff at risk. The 50-SMA (blue line) still trades below the 25-SMA (green line) but offers crucial support to the breakdown at 0.9465 as we head toward the data release. 

The uptrend seems to have lost steam, with volumes declining rapidly. If the Eurozone inflation comes in softer than expected, the downward pressure could continue with a breakdown at 0.9465. A demand zone at 0.94420 could then become a likely destination as the breakdown at the channel is sustained. Neckline support is established at 0.9415 if this situation plays out and there is a lack of buyers at the demand zone. 

However, if the Euro finds strength on its inflation release, it could pivot from the 50-SMA to retest the breakdown level of the channel at the 25-SMA near 0.9484. Resistance at 0.9488 could then stand in the way of the buyers retracing toward the Fibonacci midpoint at 0.9529 and the 61.8% Fibonacci golden ratio at 0.9559 in the longer term. 


After ending the week relatively flat last week following the interest rate decisions from the respective central banks, the EURCHF currency pair now braces for the impact of the Eurozone inflation. The 50-SMA support could act as a pivotal level in the upcoming session, as a breakdown below this support could shift the market sentiment to the bearish side once more. 

Sources: Koyfin, Tradingview 

Piece written by Tiaan van Aswegen, Trive Financial Market Analyst 

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