FxWirePro: EUR/CHF 3-black crow and bearish engulfing patterns signal weakness – Trade tunnel spread and short hedge

EURCHF forms 3-black crow pattern which is bearish in nature. This pattern has occurred at 1.1239 levels that signal weakness. 

For now, more slumps seem to be on cards upon bearish MACD crossover (refer daily chart). 

Both leading oscillators (RSI and stochastic curves) show downward convergence that indicates strength and bearish momentum in the prevailing downswings.

While the major trend that was in consolidation phase has shown the failure swings at 78.6% Fibonacci levels.

Bearish engulfing pattern has occurred at 1.1239 levels that indicates weakness, both leading oscillators signal bearish momentum & lagging indicator signal extension of downtrend. 

The EURCHF exchange rate has already eased back below the 1.14 mark and has therefore returned into areas that are likely to begin causing the Swiss National Bank (SNB) discomfort.

On a broader perspective, the pair has been going through consolidation phase after a massive downtrend, bears have managed to break-out uptrend-line support, the major trend goes non-directional (refer monthly plotting).

Trade tips: Well, on trading perspective, at spot reference: 1.1261 levels, it is advisable to tunnel spreads using upper strikes at 1.1305 and lower strikes at 1.1239 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX keeps dipping below but remains above lower strikes on or before the expiration.

Alternatively, on hedging grounds, we advocate shorting futures contracts of mid-month tenors as the underlying spot FX likely to target southwards 1.1150 levels in the near run.

Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.

Currency Strength Index: FxWirePro's hourly EUR spot index is inching towards 40 levels (which is bullish), while hourly CHF spot index was at 94 (bullish) while articulating (at 11:16 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex