EUR/CHF – Promising inflation data ahead of Friday’s eurozone HICP release

  • Eurozone inflation data making positive moves
  • ECB unlikely to raise rates again in this tightening cycle
  • EURCHF entered into key resistance zone

Inflation data from some eurozone member states was released on Thursday and there was some cause for optimism.

While the eurozone HICP release isn’t due until tomorrow, we do get some insight ahead of time from the individual country breakdowns and it’s Germany that’s offered a promising update this morning.

Headline inflation in North Rhine Westphalia fell to 4.2% this month from 5.8% in August, a huge move that will give the ECB confidence that its decision to all but declare an end to the tightening cycle a couple of weeks ago was correct.

The decline was expected due to the expiry of a transport subsidy last year which created more favourable base effects. But as we’ve seen so much over the last couple of years, until the figures drop, you can’t be too confident.

The Spanish release was less cause for celebration but the increase from 2.6% to 3.5% was in line with expectations so there was no nasty shock that could be a cause for concern among investors or at the central bank.

The euro has firmed against the dollar today but the greenback is down against a bunch of currencies following an astonishingly strong performance over the last couple of months.

Can we see a bullish breakout?

One of the currencies that the euro has performed well against recently is the Swiss franc, with the pair pulling off its lows to trade near the upper end of a descending channel.


Source – OANDA on Trading View

What’s interesting here is that it’s now entered into a very interesting zone of potential resistance in which a combination of past support and resistance, and Fibonacci levels fall. The reason that’s important is the signal it would send if the price breaks above here, especially with the top of that descending channel then sitting slightly above again.

A break of that descending channel could be viewed as a very bullish shift after a prolonged downturn in the pair and so far, there doesn’t appear to be a lack of momentum. That could change of course and we could see the pair rotate lower once more and continue the slow decline, as has been the case for the rest of the year.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam