EURCHF trades in wedge, waiting for bearish breakout
23 January 2023
The situation is getting heated on the EURCHF who has been trading extremely technically in the past few weeks. The price is very close to a major, long-term trading signal, which should sort out the situation for weeks or even months to come.
EURCHF is currently inside the wedge formation. This is a trend correction pattern and the trend is bearish, as the price still makes lower lows and lower highs. It is not the first pattern of this type - we already saw it in the first half of 2022 and back then, it resulted in a breakout to the downside.
In addition to the wedge, we are also close to the major down trendline (black) which can act as a proper resistance. How to trade this setup? The price bouncing off the down trendline and breaking the lower line of the wedge will be a legitimate signal to go short. On the other hand, EURCHF breaking above the down trendline and the upper line of the wedge would cancel the negative sentiment and trigger a signal to buy. The first scenario is currently slightly more probable.