GBPCHF Cruising to Correct Lower in the Near-Term

Key Points:

• Consolidation phase should lead to a reversal shortly.

• Losses could extend to the 1.2465 mark.

• Keep an eye on the fundamentals for any upsets.

The GBPCHF has been experiencing some strong sentiment swings recently which comes as little surprise given the focus on both sides of the quote amid ongoing Brexit and global geopolitical uncertainty. As a result, exactly where the pair is going to end up is currently up in the air to some extent. However, from a technical perspective at least, there are some clues being provided which could be worth taking into account.

For one, we can't ignore the presence of that overarching pennant structure which is likely to cap upsides significantly. Indeed, the upside of the pattern has already been an effective dampener on the GBPCHF's attempts at pushing higher and is likely to remain in place moving forward. As a result, there seems to be little where else to go but down which is, fortunately, in line with a number of other technical instrument biases.

In particular, stochastics are firmly in overbought territory which should see buying pressure mount in the coming days. Additionally, if even a modest dip is seen in the attempt to relieve the oscillator's reading, this will have a flow-on effect and tip the Parabolic SAR and MACD towards bearish which could spark a near-term sell-off for the pair. Combined, this leaves the pair's recent rally in a fairly precarious position which could be eroded should the GBPCHF lose its footing even slightly.

As for how far we can expect to see the pair move in the event of a reversal, currently, expectations are that the 1.2618 or maybe 1.2465 level is tested within a week or so. Whilst the latter of these two would normally be the forecast for the kind of reversal discussed above, the former is shaping up to be a robust zone of support which could limit overall losses. Specifically, it is the point of intersection of not only the 31.8% Fibonacci level and a historical reversal point, but also the 100 day moving average.

Ultimately, we shall simply have to wait and see whether or not technicals or fundamentals take command of the pair over the coming sessions. However, as we can't really predict the fundamentals easily at the moment, the technical bias discussed above should be a good estimate of what to expect moving ahead. Although, remember to keep an eye on any data releases as they can still upset even the most robust of technical patterns.