EUR/CHF Forecast: Euro Tests Key Support As Risk Appetite Drives Franc Demand

• The Euro fell against the Swiss franc during early trading on Thursday to reach towards the 50-day EMA. The 50-day EMA of course previously had been a down trend line for several weeks and now it looks like it's going to offer a bit of support.

All things being equal, this is a market that continues to see a lot of noise near the 0.92 level, which of course turned things around. The 50-day EMA is about 25 pips above there and as a result, I think this is a market that is going to continue to pay close attention to risk appetite, mainly due to the fact that the Swiss franc is considered to be a safety currency.

Risk Appetite and Support Levels

But at the same time, you have to think about the idea that the Swiss National Bank of course has no interest in seeing the Swiss franc appreciate too rapidly, so there is that little bit of cushion underneath.

Ultimately, if the EUR/CHF market were to break down below the 50-day EMA, I think the Euro could drop to the 0.91 level. The 0.91 level is an area where a lot of people will be looking to take advantage of any type of bounce. If we were to break down below that level, it could open up the possibility of a move down to the 0.90 level.

To the upside, if we could break above the 200-day EMA, then we could see this market really start to take off. Keep in mind that the interest rate differential continues to favor the Euro and therefore it does give it a little bit of a natural cushion right along with the Swiss National Bank. I recognize that this is a slow grinding pair, but I like the idea of finding value on these.