A Downward Drift For GBPCHF

Technical Bias: Bearish

Key Takeaways

• British pound nosedived against the Swiss franc as the latter one escalated against a basket of currencies.

• GBPCHF broke an important trend line and closed below 200 SMA (4H), which is a bearish sign.

• More losses are possible if sellers gain control moving ahead.

Following the selling hysteria in GBPCHF, it was a consolidation period during Asian hours. Selling pressure might reemerge as BoE rate hike expectations get pushed further away into the second quarter of 2015.

Technical Analysis

There were a lot of moves noticed yesterday post the US economic releases. One currency which gained the most was the Swiss franc, as it climbed higher against almost all major currencies including Euro, British pound, Canadian dollar and the Australian dollar. GBPCHF fell sharply and broke an important bullish trend line on the 4 hour chart. The most critical point to note was that the mentioned trend line also coincided with the 200 simple moving average. So, it can be considered as a double break igniting a selling pressure in GBPCHF. The pair has successfully closed below the 200 SMA, which is a very strong bearish sign. Currently, the pair is trading around 50% fib retracement level of the last bullish wave from 1.4467 to 1.5534. So, there is a chance of a small correction in the short term towards the broken support area where sellers are likely to return again.

Only if GBPCHF successfully closes above the 200 SMA it might overcome the bearish pressure. Otherwise, there is a high probability that it might fall close to 61.8% fib level.

Moving Ahead

There are no major economic releases in the UK today. So, we need to monitor the market sentiment closely for further action. Overall, one might consider selling rallies unless the pair closes above 200 SMA.