GBP/CHF Off To a Slow Start; Eyes Support Levels

Technical Sentiment: Bullish

Key Takeaways

• Cable sheds some gains during the European session;
• Inflation Report Hearings due on Tuesday, together with BBA Mortgage Approvals which are expected to post a small drop to 41.3K;
• A correction is in play before the uptrend resumes.

Although Cable sentiment remains positive, GBP/CHF is in the middle of a small correction. Since forming a new yearly high at 1.5300, well into overbought territory, momentum has dried up and traders are now focusing on a correction towards the support at 1.5121.

 

Technical Analysis

GBP/CHF is trading around 1.5217 with an obvious short-term bearish tendency. Having formed a 2^nd Lower High last Friday, sellers are pilling on the pressure to test the main support levels before the uptrend resumes.

Price is currently probing the 50 Simple Moving Average (1.5215) on the 4H chart. Stochastic remains in overbought territory on the 4H and Daily timeframes, indicating the retracement is not complete at this point. If price remains stable below the 50 SMA, in the coming days the decline could continue towards 1.5114. This level represented a very strong resistance in recent weeks and could very well flip and turn into support as price tests it from above. A support trendline and the 100 SMA on the 4H time frame also add further strength in this area.

At this point, stop losses from short traders are accumulating above the most recent Lower High at 1.5275. A rally piercing this level will immediately shake out most sellers, opening the way back to 1.5300-1.5348 and above.

*********

Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets