Is the EUR/CHF overbought or oversold?

Mark O'Donnellon 04/08/2022|
2 min read

The EUR/CHF pair is currently in between the key levels around 0.97000–0.97900. We might see a  bounce from here up to the next resistance of 0.99500 and even up to the 1.00500 level, in confluence  with the 50 MA.  

However, the overall trend for the EUR/CHF is seemingly bearish, and we could potentially see a revisit  to the key resistances below 0.97000. 

One strategy traders might consider is to try to catch the minor downside price action in the smaller  timeframes rather than shorting the whole way down.  

EUR/CHF 1D, with 50-MA 

To implement this strategy, traders might want to look for overbought and oversold zones in the RSI and  the CCI (Commodity Channel Index) which can indicate trend reversals.  

The CCI is an oscillating indicator which measures the price difference between an instrument’s current  price and its moving average (MA) and the standard deviation of the moving average. The CCI settings  used in the above chart makes use of a 20-candlestick time period, which is a standard time frame for  the CCI. The periods of 30 and 40 are also frequently employed in the CCI since they produce a less  volatile indicator of price movements. 

The CCI can be used to spot overbought and oversold conditions which is why it can be paired with the  RSI for confirmation of this condition. Typically, the CCI is an ideal indicator for predicting the next swing  as it registers faster than the RSI and divergences are more easily spotted. Initially, you would want to  find divergences between the price action and the CCI, with the RSI used for the final confirmation. 

EUR/CHF 4H, with CCI and RSI Indicators 

At its current price, after knocking off the 0.97000 support level, the CCI is pointing to the EUR/CHF  being in a highly overbought condition. This perspective is in the 4-hour time frame. The RSI is a little  less adamant on this note, so entering a short position might be too early.