What exists in EUR/CHF is the severe misalignment between the current signal price V its noise. The current signal is located at exorbitant levels which means EUR/CHF must move from its present range. Here’s the problem, EUR/CHF correlates V EUR/USD at 0.01% and 13% V USD/CHF which means EUR/CHF is a lost wandering pair without a connection to an underlying pair. Correlations not only explains why the signal is so powerful but it also explains the ranges in EUR/CHF are small and tight.Further, correlations in EUR/USD V USD/CHF run minus 98%.
EUR/CHF ranges V USD/CHF are located at bottoms 1.0893 and 1.0916 and top at 1.0939. Current price at 1.0976 is out of range. EUR/CHF ranges V EUR/USD are located at bottoms 1.0897, 1.0920 and top at 1.0943. Current price at 1.0976 is out of range V EUR/USD and USD/CHF.
The only manner to view EUR/CHF is EUR/USD V EUR/CHF. Then out of range boundaries are better known. The bottom range is found at 1.1051, 1.1199 and 1.1347. The most vital points for EUR/CHF are located at 1.0912 and 1.0945. Current EUR/CHF is overbought intraday, oversold long term but not to any great degree. Higher EUR/CHF flys, more overbought intrady price becomes. Part of the oversold explanation is found from lingering effects when the SNB relieved EUR/CHF of the 1.2000 floor. The effects of the SNB’s decision will be felt for many years to come as longer term averages normalize to current price.
The end result for EUR/CHF is it remains a lost pair as no correlations exist and EUR/USD correlates negatively to USD/CHF. This means not only more range bound but again the EUR V USD conundrum is seen. To move current price, EUR and USD must resolve its relationship. A breakout is coming.
USD/CHF ranges are found at bottoms 0.9657, 0.9788 and top at 0.9919. Current USD/CHF price is comfortable within current ranges yet trades in middle bounds. Best strategy for USD/CHF is trade ranges until a breakout occurs in EUR V USD.
Brian Twomey, Inside the Currency Market, btwomey.com