Since gaps don't occur very frequently in the forex market, they are worth noticing when they do. That is precisely the reason why we are examining EUR/CHF, particularly now that prices have returned following a brief decline.
According to the one-hour chart above, this week started out with a gap lower than usual, going from a Friday close of 0.9628 to a Monday open of 0.9592. Risk-off sentiment brought on by geopolitical factors was most likely to blame for the downward movement of EUR/CHF on Monday.
However, the pair has now rallied, putting the market back to the gap and heightening the possibility that it will not close, a situation that frequently prompts traders to resume the general trend, in this case lower.
The gap also happens to be accompanied by a number of technical indicators that are likely to catch traders' attention, such as a retest of the falling "highs" trendline, falling moving averages, and a broken minor support area that corresponds to the 50% Fibonacci retracement area.
The stochastic indicator is indicating potentially overbought short-term conditions together with chart technicals.
So the question for technicals out there is whether or not this will draw enough sellers back to continue the downtrend? Or will the bulls push the market further and break that very strong area of technical interest?
As always, it’s mostly up to the fundamentals, but for now this is something to have on the radar and if bearish reversal patterns emerge if you’re a bear, then it may be time to work on a risk management plan that aligns with that bias and your individual trading situation.
