EUR/CHF (daily chart) as of Monday (8/01/2011) has dropped dramatically to hit its downside target area just above 1.1000, establishing yet a new all-time low around 1.1023 in the process. This occurs within the context of a clear long-term, medium-term, and short-term bearish trend for the pair. This downside target price region represents both a key 161.8% Fibonacci extension as well as a separate 261.8% Fibonacci extension target within uncharted price territory. A bullish retracement/correction within the context of the recent dramatic bearishness should soon be due. In the event of a downtrend continuation, which would be confirmed on a strong breakdown below the 1.1000 psychological level, price action could potentially begin targeting further uncharted downside around the 1.0600 price region, which represents the 261.8% Fibonacci extension of the last major bullish retracement.
(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)
James Chen, CTA, CMT
Director of Technical Research and Education