The massively undervalued euro appears to have reached a fresh dip against the Swiss franc, at least temporarily. However, the broader market sentiment remains tilted to the downside as the greenback strengthens. Check out our newest analysis of the EURUSD for additional information.
According to ZEW, the leading indicator for economic sentiment in the largest economy in the Eurozone contracted more than initially expected in October. The overall economic sentiment in Germany fell to its lowest level since March 2020, which was recorded immediately after the initial coronavirus fallout.
Nevertheless, the single currency started showing early signs of a tentative recovery. As can be seen on the 4H chart above, the EURCHF consolidates above the previous swing low at 1.070000, which could be a prelude to an upcoming bullish pullback.
Notice that the price action has just completed a major Descending Wedge at the bottom of the recent downtrend, which is a type of pattern that typically entails the possibility for such a bullish rebound. Meanwhile, the steadily increasing bullish bias is picked up by the MACD indicator.
If the price action manages to penetrate above the 20-day MA (in red), it would be then able to attempt rallying towards the 23.6 per cent Fibonacci retracement level at 1.07575, which is currently being crossed by the 50-day MA (in green). This makes it an even more prominent resistance level.
The next bullish target is represented by the 38.2 per cent Fibonacci at 1.07920, which, in turn, is currently converging with the 100-day MA (in blue).
The ZEW index faltered to 22.3 index points in October, below September's 26.5 points and the consensus forecasts of 23.7.
Part of the reason for German business' negative outlook on the economy has to do with the disappointing manufacturing numbers for September coupled with a general squeeze in consumption that is being observed across the Euro Area.