EUR/CHF forecast sees the single currency slip lower in the past few hours, but this could be a harbinger of a growth resumption.
The euro could still increase in the short term after some positive eurozone economic data. The Flash Manufacturing PMI remained steady at 63.1 points, even if economists expected to see a drop to 62.4, while the Flash Services PMI increased from 55.2 to 58.0 points.
Perhaps not surprisingly given the progress that has been made with vaccinations in Germany and other EU countries, the German Flash Manufacturing PMI and the Flash Services PMI have both increased significantly, indicating strengthening expansion.
Eurozone engine house Germany is motoring
Tomorrow, the pair could jump higher if the German ifo Business Climate reading comes out in line with expectations or better.
There tends to be a negative correlation between the euro and US dollar, so the weakening dollar today is reflected in a stronger euro.
Release of the latest flash Markit PMI figures from the eurozone have also helped to firm the euro single currency. It business activity growing at its fastest pace in 15 years as a result of the reopening of the economy as lockdown measures are progressively lifted across the bloc.
IHS Markit’s flash eurozone PMI was up from 57.1 in May to 59.2 this month. That is the best reading since June 2006 and was a blow out in terms of economists’ forecasts.
Chris Williamson, Chief Business Economist at IHS Markit commenting on the latest figures said: “The Eurozone economy is booming at a pace not seen for 15 years as businesses report surging demand, with the upturn becoming increasingly broad-based, spreading from manufacturing to encompass more service sectors, especially consumer-facing firms.”
EUR/CHF forecast: technical analysis
In our forecast we see EUR/CHF is managing to come back above the 50% retracement level. Now it is located at 1.0959 level and it could approach the median line (ml).
The median line and the weekly R1 (1.0975) are seen as immediate resistance levels. A valid breakout above these levels signal an important growth towards the down channel’s resistance.
The upside scenario could be invalidated by a false breakout with great separation above the median line (ml) or if EUR/CHF fails to reach the median line.
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