GBP/CHF has been trading in a sliding mode since Wednesday, and today, it managed to fall below the upside support line taken from the low of October 1st, and the 1.2657 barrier, marked by the low of October 18th. In our view, this has confirmed the completion non-failure swing top, which combined with the dip below the upside line, constitutes a trend reversal signal.
With that in mind, we believe that the dip below 1.2657 may have opened the door towards the low of October 14th, at 1.2593. The bears may decide to take a break after testing that zone, thereby allowing a corrective bounce, but if that stays short-lived below 1.2657, another round of selling could be possible, perhaps even below 1.2593. If this is indeed the case, we would expect the break below 1.2593 to set the stage for declines towards the low of October 1st, at 1.2503.
Shifting attention to our short-term oscillators, we see that the RSI lies below 50, slightly above 30 and points down. It could fall below 30 soon. The MACD runs below both its zero and trigger lines, pointing down as well. Both indicators detect strong downside momentum and corroborate our view for further declines in this exchange rate.
On the upside, we would like to see a recovery above 1.2718 before we start examining whether the bulls have stolen the bears’ swords. The rate will already be well above the aforementioned upside line, and this may encourage advances towards Wednesday’s peak at 1.2763. If the bulls are not willing to give up at that zone ad manage to break higher, then we could see them climbing towards the peak of September 17th, at 1.2820.
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