Euro's bounce against franc is just a pause, not a turnaround

After a difficult stretch in October, the euro has been finding some relief against the franc since late last week. EUR/CHF has turned higher from the 0.9200 area and is trading near 0.9245 on the day. The open question is whether this is a real reversal or just a pause before the next move down.

At this stage, the technical outlook still leans in favour of sellers despite the recent bounce.

The pair had already slipped beneath its trendline support drawn from the March-to-May lows, the 100-day moving average, and the 0.9300 level earlier this month. That leaves buyers in a tough position, with 0.9300 now acting as a major resistance zone alongside the broken trendline.

The rebound is meeting resistance around the 100-hour moving average near 0.9243. That level has been limiting upside since last week and is under test once more, with the 200-hour moving average near 0.9263 as the next hurdle.

To the downside, 0.9200 remains the crucial support to monitor. A decisive break below that would bring the late June-to-July lows near 0.9175-80 into view and could open the way toward 0.9000 afterwards.

So what might push the euro lower from here?

The clearest candidate is France's fiscal and political troubles, which continue to weigh on sentiment. The spread between French and German 10-year yields is holding around 166 bps after reaching a high of 176 bps last week, the highest level since the Eurozone debt crisis of 2011.

French borrowing costs stay elevated as investors keep questioning the country's fiscal outlook. Until those worries fade, the franc will keep its appeal as an alternative whenever European risks resurface.

For now, euro buyers will take some comfort from the EUR/CHF bounce. Still, a great deal more needs to happen before this can be considered a meaningful turnaround.