Trade Idea: GBP/CHF Resistance Turned Support

Sterling has been one of the strongest performers these days so I’m looking to catch the bullish run with this simple pullback setup on GBP/CHF. Take a look!

GBP/CHF Trade Idea

The pair recently made a strong upside break from resitsance around the 1.2150-1.2200 levels, indicating that pound bulls have taken control of price action. Price has already climbed pretty high so the R:R won’t be as good if I hop in a long position at market. Instead, I’m opting to wait for a pullback to the broken resistance after buyers book profits from the recent rally.

Using the handy-dandy Fib tool on the latest swing low and high on the 1-hour chart shows that the 50% level lines up with the area of interest. Stochastic is indicating overbought conditions for now, which means that buyers could take it easy from here and give way to a correction.

GBP/CHF 1-hour Forex Chart

GBP/CHF 1-hour Forex Chart

Risk appetite seems to be lifting the British pound, along with higher-yielding currencies, as market participants are easing up on their gloom-and-doom forecasts. Hey, if the Trump presidency isn’t the worst thing for Uncle Sam, maybe the Brexit won’t be so bad for the U.K. too?

Besides, U.K. economic reports haven’t been all that bad as the services and construction PMIs have still been above expectations. Also, the British High Court ruling that requires parliament to give the thumbs-up first before Article 50 is triggered could enable U.K. officials to come up with the best possible Brexit game plan before going head to head with EU leaders.

As for the Swiss franc, the lower-yielding currency is losing ground on risk-taking and the SNB’s ever-present intervention threat isn’t doing the currency any favors. Zooming out to the much longer-term time frames reveals that GBP/CHF is trading close to its 2011 lows, and I’m inclined to think that SNB officials won’t let the pair go any lower from here.

Here’s my plan:

Long GBP/CHF at 1.2175, stop loss at 1.1975, initial profit target at 1.2475 for a 1.5-to-1 R:R. I’ll risk 0.5% of my account on this setup.

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 thinking of taking the same setups.

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