Technical Bias: Bearish
Key Takeaways
British pound is trading lower against the US dollar and Swiss franc, and looks set for more downside moving ahead.
UK construction PMI will be released today, which can cause swing moves in the short term.
GBPCHF eyes a test of 50 simple moving average (4H) after failing around an important resistance area.
The British pound struggled recently against a basket of currencies, including the US dollar and Swiss franc. There is a possibility of more losses as long as sellers remain in control.
UK Construction PMI
The UK Construction Purchasing Manager's Index (PMI) will be released by the Chartered Institute of Purchasing & Supply and Markit Economics. The forecast is slated for a decline of 0.5 points in September 2014 from the previous month reading of 64.0. If the construction PMI registers a decline of more than 1 point, then the British pound might come under pressure in the short term.
Technical Analysis
Yesterday, the GBPCHF pair stalled right around an important bearish trend line on the 4 hour timeframe. GBPCHF made a minor high above the 1.5530 level and failed to break the mentioned resistance trend line. There was an RSI divergence created as well, which suggests that it was a false break. The GBPCHF pair has closed below the 23.6% Fibonacci retracement level of the last leg from the 1.5307 low to 1.5534 high. So, there is a chance that it might head towards the 50% fib level, which also coincides with the 50 simple moving average (SMA) – 4H. A break and close below the same could take it towards the 100 SMA (4H).
Alternatively, there is a possibility that the pair might bounce from the 1.5420-40 support area. However, it could again struggle to break the highlighted trend line. Overall, buying dips can be considered as long as it stays above the 50 SMA (4H).
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