The EUR/CHF, a currency pair renowned for having low volatility under normal conditions, is trading particularly quietly today with both the Eurozone and Switzerland on holiday for May Day.
Late last week, Swiss National Bank President Thomas Jordan reiterated the central bank’s dedication toward maintaining the 1.20 floor in order to ward off deflation. Just as it has in the past, the bank pledged that it would purchase “foreign currency in unlimited quantities” if necessary. At this point, the established 1.20 floor will likely remain an indelible feature of the foreign exchange landscape for the foreseeable future.
Despite the small ranges of late, the EUR/CHF continues to offer actionable trading opportunities for patient technical traders. As we’ve noted in the past (see here and here for two recent examples), the pair is respecting near-term technical resistance levels, including resistance at the 100-day moving average. Twice in April, the EUR/CHF rallied up to test the 100-day MA, but sellers were able to rebuff the pair on both occasions. Heading into May, that indicator may continue to cap near-term rallies in the pair around 1.2220. The RSI indicator also augurs for a near-term bearish bias, as it continues to reverse off the key 60 level, indicating that the sellers have maintained the upper hand throughout all of 2014.
Moving forward, more weakness is favored in the near term, with bears looking to drive the pair down toward the previous lows at 1.2170 or 1.2140 next. On the other hand, a bullish reversal back above the 100-day movign average (a development we haven’t seen since January) would shift the near-term bias back to neutral.