As we explained to in our EUR/CHF video a few days ago, the recent gains in the EUR/CHF may not necessarily indicate that there is significant strength in this pair just yet. The reason for this is that most of the buying of this pair has been done at the hands of the Swiss National Bank who has stated that a EUR/CHF rate below 1.2 is not tolerable. In September the Swiss National Bank announced that it had 253.35 billion francs ($319.7 billion) at the end of August, up from 182.1 billion francs in the previous month, a result of measures to weaken the franc for domestic policy purposes.
Generally such a strong signal from a central bank will send a currency pair strongly in the direction of their buying, however, we have not seen this yet in this particular pair as shown by the chart below with the rate moving back towards the 1.2 level.
Having said that, the 1.2 level should provide some excellent support, and for this reason we would not recommend short selling this pair. Look for some significant buying action and for the pair to climb above the recent highs beyond 1.24 before moving in. The longer term charts also indicate that this pair could be forming a head and shoulder pattern, so a break on the upside is possible. The next significant move is vital in this pair so be patient.
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