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).

GBPCHF

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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