On Euro to Swiss Franc (EUR/CHF), we have an intriguing setup developing, as the pair is in the process of forming the right shoulder of a potential head and shoulders pattern. This is a classic bearish reversal formation, and while the price has not yet confronted the neckline, marked in green, it appears poised to test it soon.
A break and daily close below the green neckline would confirm the bearish structure and signal a potential sell opportunity. If this scenario unfolds, we would likely see further downside pressure, targeting the yellow horizontal support as the next critical level. A daily close below this yellow support would further confirm a negative sentiment, paving the way for a more extended bearish downswing.
Interestingly, this setup contrasts with the previous inverse head and shoulders pattern, marked in orange, which resulted in a bullish upswing. Just as that pattern led to strong gains, the current head and shoulders pattern has the potential to trigger a significant bearish move if the neckline is broken.
For now, the key is to monitor the neckline and observe the price action around it. A failure to break below could negate the bearish sentiment and maintain a neutral or bullish outlook. However, a clear break and close below the green neckline and subsequent yellow support would confirm the bearish scenario and provide a strong signal to go short.