EUR/CHF Triangle Presents Scalping Opportunity

The EUR/CHF price action has quieted as concerns over the crisis in Europe have waned which could continue with Ireland’s passing of a new budget. The new fiscal plan includes austerity measures negotiated as part of a bailout package from the E.U. and IMF for the indebted island nation. However, markets remained concerned over Spain and Portugal which could limit Euro support and lead to further consolidation for the pair. Indeed, a more optimistic market has lead to the safe haven Franc fallen out of favor for the time being. Additionally, Switzerland’s dependence on European demand has lead to an increase in the correlation between the two currencies which rises in line with concerns for the region.

Key Technical Levels

Charts created using Strategy Trader– Prepared by John Rivera

A developing wedge is pointing toward further consolidation for the pair with a lower trend line drawn from the September low of 1.2765 providing solid support. The recent decline has established resistance levels that may keep downward pressure on the pair. Prior daily highs and lows are good target level for traders in addition to the established trend lines.

Charts created using Strategy Trader– Prepared by John Rivera

Key Support/ResistanceLevels to Watch

Pair	S/R	Level	Spot	Valid Since	Market Influence
EUR/USD	Resistance	20-Day SMA	1.3426	11/08/10	Medium
USD/JPY	Support	50-Day SMA	82.37	11/15/10	Low
NZD/USD	Resistance	20-Day SMA	0.7643	11/22/10	Low

Quantitative Metrics

The EUR/CHF’s Bollinger band width remains wide at 652 pips as the pair has been in a bearish trend. The level of variance is in the upper echelon of the most traded pairs and is a red flag for high frequency traders. Meanwhile, daily volatility is also on the rise with the ATR reaching 144 pips. However, we have seen price action begin to quiet which is why we have targeted the pair. Additionally, implied volatility readings continue to trend lower as more solutions emerge for the debt crisis in Europe.

Charts created using Strategy Trader– Prepared by John Rivera

Volatility / Activity Indicators

	EURUSD	GBPUSD	USDJPY	USDCHF	USDCAD	AUDUSD	NZDUSD	GBPJPY	EURJPY
ATR(14)	0.0182	0.0148	0.7333	0.0111	0.0106	0.0137	0.0101	1.4689	1.5178
ATR%	1.36%	0.93%	0.88%	1.14%	1.05%	1.38%	1.32%	1.12%	1.37%
20-5 Day SMA	0.0156	0.0140	-0.0297	0.0033	0.0064	-0.0012	0.0060	1.1163	1.2599
Boll. Band Width	0.0913	0.0765	2.6729	0.0448	0.0326	0.0507	0.0478	4.7564	5.7198
1 wk Implied Vol	12.1950	9.1700	9.6275	9.8925	9.5250	12.8450	12.9100	11.7200	13.3000