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Chart of the Day: EURCHF

A simple chart but one that should be on the radar. As we can see, price has broken the multi-month downtrend, which, after the period of consolidation, has seen price print a higher high. Momentum has turned to the upside, and the risk of a move into 1.1060 is elevated. Obviously, the risk comes from this Thursday’s European Central Bank meeting, but the price action feels as though EUR shorts are adjusting exposures on the concern the bank underwhelms market expectations on rate cuts, renewed asset purchases and forward guidance.

EURCHF, daily

EURCHF has also found a near-term correlation with the German yield curve — a steep curve. That being, 10-year German bund yields move higher relative to shorter-duration maturities. So if the ECB wants to try and positively influence the EU banking sectors, profitability and, actually, incentives lending, then engineering a steeper yield curve goes some way to do that. That could suggest that despite easing, we actually see a stronger EURCHF.

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