The correlation between EUR/CHF and European stock indices, such as the France CAC and Germany DAX, has been remarkably high in recent times. This high positive correlation, with coefficients reaching 0.82 and 0.84, indicates a strong relationship between the movement of the currency pair and the performance of these key European benchmarks. The synchronized movements of EUR/CHF and these stock indices suggest a deep interconnection between the financial markets in Europe.
China’s core inflation and producer prices for August have raised concerns about lackluster internal demand in the country. The decline in consumer demand in China presents a risk for European companies that rely on the Chinese market for their profits, especially in industries such as luxury goods, cars, and machinery. The sluggish economic indicators from China may have a direct impact on the profitability of European firms, potentially leading to a downturn in the France CAC and Germany DAX.
One key level to watch for in the EUR/CHF movement is the intermediate support at 0.9255. During a recent global risk-off episode, the currency pair managed to hold above this level, indicating its significance in the current market conditions. However, the rebound from this support has been limited by the 200-day moving average, suggesting a potential resistance level at around 0.9580. The breach of the weekly MACD trend indicator’s centreline further supports the notion of a major downtrend in the EUR/CHF.
If the EUR/CHF fails to overcome the 0.9780 pivotal resistance level, it may experience further weakness, with possible support levels at 0.9085 and 0.8890. On the other hand, a break above 0.9780 could shift the bearish tone and open up the possibility of a rebound towards the long-term pivotal resistance zone of 1.0040/1.1000. These support and resistance levels play a crucial role in determining the future trajectory of the EUR/CHF pair.
The close relationship between EUR/CHF and European stock indices, combined with the impact of China’s economic indicators, reflects the intricate dynamics of the global financial markets. Traders and investors need to be aware of these factors and carefully monitor the support and resistance levels in the EUR/CHF pair to make informed decisions in the current market environment.