The Euro (EUR) crashed against the Swiss Franc (CHF) yesterday, dragging the price of EURCHF to less than even 0.9700 – a nosedive of more than 2000 pips in a single day as the Swiss National Bank (SNB) took a 180 degree U-Turn in its monetary policy, scrapping the 1.20 floor level and declining the benchmark interest rate by 50 basis points to -0.75%.
As of this writing, the pair is being traded near 1.0056. An immediate support lies at 0.9650, the intraday low of yesterday ahead of 0.9000, the psychological number as demonstrated in the following daily chart. A break below the 0.9000 support area could incite renewed selling pressure
On the upside, the pair is expected to face a hurdle near 1.1000, the psychological number and then 1.2000, the old floor level turned resistance area. The technical bias will remain bearish as long as the 1.2010 level is intact.
The Swiss Central Bank yesterday announced removal of the floor level in EURCHF which was set at 1.2000 three years ago. The bank also reduced its benchmark interest rate by 50 basis points to -0.75%. The decision about removal of 1.20 cap level was totally unexpected because the SNB had reiterated a few days ago about protecting the 1.2000 floor with “Unlimited Resources.” Traders were expecting major intervention by SNB around the 1.2000 level but the yesterday’s event breached even the parity level in the euro/franc pair.
Considering the overall technical and fundamental outlook, selling the EURCHF on rallies appears to be a good strategy in short to medium term. 1.1000 offers good selling opportunity if the price leaves a bearish pin bar or bearish engulfing pattern on the daily chart.