Will EUR/CHF Break 1-Year Lows?

Will EUR/CHF Break 1-Year Lows?

Fundamentals

Since the beginning of the year, EUR/CHF has been in a strong downtrend that has taken the currency pair to a one year low. A quick look at a EUR/USD chart will show that the sell-off in EUR/CHF has been driven not by euro weakness but rather Swiss strength. Demand for the Swissie has been fueled by the growing geopolitical uncertainty, concerns about slower Chinese growth and the recent liquidation in equities. In a nutshell, the sell-off in EUR/CHF has been caused by risk aversion. So the question of whether EUR/CHF will break 1 year lows is basically a question of whether the situation in Crimea escalates over the weekend with the referendum vote. If it does, EUR/CHF could drop below 1.21. However traders need to be cautious ahead of 1.20, a level that the Swiss National Bank has pledged to defend repeatedly. With inflationary pressures falling further and retail sales growth slowing the central bank has every reason to want to keep EUR/CHF above 1.20.

Technicals

From a technical perspective, EUR/CHF is clearly in a downtrend with the swing low of 1.2105 as the closest level of support. If this level is broken the next level to watch is 1.2030. If EUR/CHF starts to turn higher, 1.2220 should be resistance.

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