The Euro has weakened against the Swiss Franc, trading near a low point of 0.9318, following cautious comments from European Central Bank (ECB) officials.

Global Risks Impact

ECB Chief Economist Philip Lane has pointed out rising global risks, including trade barriers and restrictions on capital flows. Deputy Director-General Livio Stracca warns that climate-related issues could lower eurozone GDP by up to 5% over the next five years, similar to the effects of the COVID-19 crisis. These concerns make the ECB cautious, which may keep the Euro under pressure. Currently, the EUR/CHF pair is moving within a range between 0.9300 and 0.9430, a pattern that has persisted since April. If the pair breaks below the 0.9300 support level, it could signal a bearish trend. The pair is trading below the 20-day Simple Moving Average of 0.9365, making it a strong resistance level. Momentum indicators show weakness, with the Relative Strength Index (RSI) around 40, signaling declining buying interest. A drop below 0.9300 could increase downward pressure, while a recovery would need to push above 0.9365 to change the current trend. The Euro’s ongoing decline against the Swiss Franc reflects overall market sentiment shaped by the ECB’s cautious stance. Lane’s warnings about increasing trade barriers and limited capital mobility point to potential risks for the eurozone’s competitiveness and productivity, not just in the future but impacting current market dynamics. Stracca adds another concern, suggesting that climate-related issues could have significant medium-term economic effects, similar to those seen during the pandemic. He connects climate instability to real risks to both output and price stability. This makes it unlikely that the ECB will consider aggressive interest rate changes or balance sheet adjustments.

Trading Standpoint

From a trading perspective, the signals of caution are impacting price movements. The EUR/CHF’s long-standing range shows that traders are hesitant to move beyond established support and resistance levels. This month, the inability to maintain gains above 0.9365 highlights the challenges short-term buyers face. The recent rejection from the 20-day simple moving average just above 0.9360 was noticeable and coincided with declining momentum, evident from the RSI around 40. There have been limited attempts to stabilize near 0.9330, and with ongoing downward pressure, testing the support level near 0.9300 seems more likely now. If the pair breaks below 0.9300, there isn’t much support nearby, making further declines more probable. In such a case, sellers may not hesitate. Any upward corrections are likely to be minor unless market volatility increases or short-position traders become overcrowded. Conversely, if the pair manages to rise past 0.9365, it would prompt a reevaluation of market intentions, possibly hinting at a short-term reversal, but that’s not the current scenario. For those involved in trades or cross-market strategies, our focus remains on the lower range. This cautious approach, supported by the ECB’s stance and ongoing economic risks, suits range-trading strategies while the floor holds. It is crucial to maintain tight risk thresholds near 0.9300, as a breach could lead to broader price adjustments. Leverage should reflect the prevailing trend. In summary, resistance is strong, and support is weakening. Both technical indicators and policy perspectives suggest limited opportunities for Euro buyers unless a new macro narrative emerges. Currently, the trend leans downward, not upward. Create your live VT Markets account and start trading now.

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