- EUR/CHF has unfolded a correction over the last four days.
- This move now looks almost complete and the bullish prior move is likely to resume.
EUR/CHF pulls back in the middle of a recovery rally. Despite the overall bearish medium-term trend the pair is showing signs it could press higher in the short-term.
EUR/CHF Daily Chart
EUR/CHF formed a Bullish Engulfing Japanese candlestick pattern on the day it bottomed on September 11 (shaded rectangle). This happens when price reaches a new low in a downtrend, reverses during the same day and closes higher. When the body of the recovery candle encompasses – or “engulfs” – the whole of the previous day’s body it is known in technical analysis as a Bullish Engulfing. The following day was a green up day adding confirmation to the Bullish Engulfing. The whole pattern is a short-term bullish signal.
Not long after the recovery, the pair pulled back on September 12, however, the correction has been shallow and seems to have traced out a vague three-wave corrective pattern. This suggests the bullish rebound will probably resume. The correction also looks close to completion.
A break above 0.9434 (September 12 high) would confirm a continuation higher, with the next target at 0.9464, followed by 0.9513 in the case of a particularly bullish move.
A break below 0.9369 would probably invalidate the bullish hypothesis and suggest a more neutral or bearish outlook.
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