The GBPCHF pair has been moving in a steady downtrend since the beginning of summer, regularly renewing the lows. Yesterday, a new historic low of 1.08127 was set, followed by a corrective rebound. How long will the “bulls” have the strength to correct it before the GBPCHF continues its way down?
Besides the technical oversoldness marked by the RSI indicator, the yesterday’s rebound of the GBPCHF was facilitated by the meetings of the central banks of England and Switzerland. There were no surprises: the Bank of England raised the key rate by 0.5% to 2.25%, while the Swiss National Bank finally led its rate out of the negative zone, increasing its size by 0.75% to 0.5%.
Some market participants expected more decisive actions from the financial regulators. However, England is already officially awaiting a recession from the 4th quarter of this year, and under these conditions, a sharp increase in the interest rates will be much harder. Meanwhile, the Swiss regulator, unlike many other central banks, can afford to keep the rates low because inflation of 3.5% doesn’t seem critical, especially in comparison with the growth of prices in England, the US, and the European Union.
As there are no significant changes in the position of the pound and franc, it’s possible to assume the downtrend continuation of the GBPCHF pair. Despite the rate hike, the British currency will continue to experience the pressure from almost a double-digit inflation, large trading balance deficit, and expectations of the recession in the national economy. Under the current conditions, the franc is one of the most stable currencies: a historically high reliability of the Swiss currency and a sustainable trade surplus.
The current rebound from the historic low led to a buy signal from the RSI indicator and the “bullish engulfing” pattern. For greater reliability, you might await the price movement to the trendline in the area of 1.11, and open the position there with the eye toward the continuing decline of the pound against the franc.
Following trading strategies can be offered:
1) Sell GBPCHF at the current price. Take profit – 1.088. Stop loss – 1.105.
2) Sell GBPCHF on the rise to the level of 1.11. Take profit 1 – 1.1. Take profit 2 – 1.088. Stop loss – 1.115.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
