I’m seeing a lot of consolidation among pound pairs these days, as traders are probably waiting for more economic clues. I’ve got a bit of a bearish bias so I’m waiting to short GBP/CHF at these areas.
Price is currently testing the triangle support around the 1.2900 major psychological mark, still deciding whether to make a bounce or a break. A strong downside breakout could spur a 250-pip drop, which is roughly the same height as the triangle formation. On the other hand, a bounce could lead to a test of the resistance around the 1.3000 handle.
GBP/CHF Trade Idea
I’m pound bearish mostly due to the downbeat leading indicators we’ve been seeing from the U.K. these days, particularly when it comes to business and consumer sentiment. Earlier in the month, the manufacturing and services PMI readings slumped below 50.0 to indicate industry contraction for July, possibly the first few signs of a slowdown after the Brexit vote.
Meanwhile, the Swiss franc is benefitting from the flight to safety in the European region, as more signs of banking sector troubles were seen in Italy. So far, the SNB doesn’t seem to be too worried about franc appreciation since economic data from Switzerland has been somewhat upbeat and the ECB’s decision to keep monetary policy unchanged lessens the need for currency intervention.
I haven’t set any entry orders yet since I’m planning on waiting for a breakout catalyst or a possible test of resistance. We’ve got the BOE monetary policy decision lined up for next week anyway, so I’m expecting additional volatility by then.
As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re following my trade decisions!