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The Euro is currently showing a strong upward trend in which long speculative positions have reached a 6-year high according to the futures regulator CFTC. The recent political and economic risks reduction in the eurozone could encourage the European Central Bank to pursue a tighter monetary policy from next year on. So far, the ECB has not raised this topic but did increase the expected growth and acknowledges that the risk of deflation has decreased significantly. According to the OECD, the global economic growth is likely to reach 3.5% in 2017 – the highest level of the past 6 years. This should encourage the economic recovery in Europe, being a net exporter. On the other hand, the renewed optimism on the financial markets puts a cap on the demand for safe-haven currencies like the Swiss franc.
The EUR/CHF ended its downward trend since the February high of 2016 at 1.12. The bullish gap observed after the first round of the presidential election in France propelled the pair above its 40-week (200 days) exponential moving average, now bullish (color changed from orange to blue). With a raise of more than 300 points in a few days and by briefly reaching the 1.10 psychological level, the EURCHF retraced approximately 38.20% of the wave. However, this is not enough to stop the upward trend. The momentum indicators RSI and MACD currently in a positive territory have not actually shown any divergence.
We can find an important support level at 1.08 that corresponds to the 200-day exponential moving average and the 61.8% Fibonacci retracement level of the latest upward trend. If breaking the support level, there should be an acceleration towards the year low at 1.0630 corresponding to the 61.8% retracement level of the most important variation between the April low (1.0243) of 2015 and the 2016 high (1.1199). If the support level at 1.08 holds, the EURCHF pair should head towards 1.12 by the end of the year, - the highest level reached since the end of the 1.20 floor rate in January 2015 – and then towards 1.15 if that level is broken.