In the last week or so, sterling traders have been suffering through news overload with headlines aplenty on Brexit and on UK politics. Euphoria on Monday sent cable near to this year’s highs as prices consolidated above 1.35. This was due to market expectations of sufficient progress being made in Brexit negotiations which would allow progress to phase two.

However the dwindling prospects of a deal ahead of next week’s EU summit have subsequently hit the pound. Stiff challenges remain from both the DUP and members of May’s cabinet with issues still surrounding the Irish border and post-Brexit regulatory arrangements. The clock is certainly ticking for May to come up with a solution before next Thursday’s summit.

‘Headline havoc’ is how one trading desk has labelled the current environment, which sums up perfectly how choppy sterling has become on an intra-day basis. In these circumstance, it is always prudent to take a step back and look at longer-term charts. In which light, one pair which has taken our eye most recently has been GBP/CHF.

GBPCHF

GBP/CHF Weekly Candle Chart

We can see on the weekly chart that prices had been stuck in a long-term range between 1.2000 and 1.3000. In the last few weeks, prices have consolidated tightly at the higher end of this range. However, there have been numerous attempts by bulls to break decisively higher but selling pressure has prevailed to push prices back. Interestingly the 38% retracement of the November 2015 high to September 2016 low comes in around 1.3220.

GBPCHF

GBP/CHF Daily Candle Chart

Of course what particularly appeals to us is that periods of tight ranges and price consolidation are often followed by sessions of range expansion. On the daily candle chart, we can see November’s compression in finer detail. Indeed, over the last few days, we have had three consecutive ‘inside days’ which followed on from a bearish engulfing candle - we note that periods of such intense price compression are rare. However, it is also significant that prices have tried to push above 1.3300 on numerous occasions now so we are wary of failed attempts to break higher- the well-known ‘fake-out’.

Much of course depends currently on whether we get a concrete Brexit deal ahead of the EU summit. If we do, then GBP/CHF can head to new highs around 1.3500 which marks a previous swing low back in April 2016. Less positive news will potentially push the pair below previous resistance towards 1.3000 as Brexit becomes less binary, and more of the ‘hard’ variety.

This research is for informational purposes and should not be construed as personal advice. Trading any financial market involves risk. Trading on leverage involves risk of losses greater than deposits.

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD: A tough barrier remains around 0.6800

AUD/USD: A tough barrier remains around 0.6800

AUD/USD failed to maintain the earlier surpass of the 0.6800 barrier, eventually succumbing to the late rebound in the Greenback following the Fed’s decision to lower its interest rates by50 bps.

AUD/USD News
EUR/USD still targets the 2024 peaks around 1.1200

EUR/USD still targets the 2024 peaks around 1.1200

EUR/USD added to Tuesday’s losses after the post-FOMC rebound in the US Dollar prompted the pair to give away earlier gains to three-week highs in the 1.1185-1.1190 band.

EUR/USD News
Gold surrenders gains and drops to weekly lows near $2,550

Gold surrenders gains and drops to weekly lows near $2,550

Gold prices reverses the initial uptick to record highs around the $$2,600 per ounce troy, coming under renewed downside pressure and revisiting the $2,550 zone amidst the late recovery in the US Dollar.

Gold News
Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum (ETH) is trading above $2,330 on Wednesday as the market is recovering following the Federal Reserve's (Fed) decision to cut interest rates by 50 basis points. Meanwhile, Ethereum exchange-traded funds (ETF) recorded $15.1 million in outflows.

Read more
UK CPI set to grow at stable 2.2% in August ahead of BoE meeting

UK CPI set to grow at stable 2.2% in August ahead of BoE meeting

The United Kingdom Office for National Statistics will release August Consumer Price Index figures on Wednesday. Inflation, as measured by the CPI, is one of the main factors on which the Bank of England bases its monetary policy decision, meaning the data is considered a major mover of the Pound Sterling.

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Majors

Cryptocurrencies

Signatures