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The sell-off in Sterling continues, and today we’re checking out GBP/CHF as the downside momentum seems to have picked up and the pair tests a major support area.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/GBP ahead of the European Central Bank’s latest monetary policy statement, so be sure to check that out to see if there is still a potential play!

Intermarket Snapshot

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Fresh Market Headlines & Economic Data:

European Central Bank keeps rates and stimulus program unchanged, despite stronger euro

Lagarde comments at ECB press conference

Stocks rise for a second day, Dow up 200 points as tech continues rebound from big sell-off

U.S. weekly jobless claims total 884,000, vs 850,000 expected

U.S. producer prices beat expectations in August

EU ponders legal action against Britain over plan to break Brexit deal

UK’s post-Brexit plan puts trade deal with the EU — and the U.S. — at risk

Upcoming Potential Catalysts on the Economic Calendar

Bank of Canada Governor Macklem speech at 4:30 pm GMT
ECB President Lagarde speech at 5:00 pm GMT
New Zealand Manufacturing Index at 10:30 pm GMT
Japan PPI, BSI Manufacturing Index at 11:50 pm GMT

What to Watch: GBP/CHF

GBP/CHF 4-Hour Forex Chart
GBP/CHF 4-Hour Forex Chart

On the four-hour chart above of GBP/CHF, we can see the drop in Sterling picked up speed over the past few sessions, including today where it was enough to easily break through the major support area around 1.1750. 

This move has been fueled by the increasingly tense drama over Brexit between the EU and the U.K., and today’s fast run lower beyond support was likely sparked by the Swiss franc, which seems to be running higher with the euro after the ECB refrained from jawboning down the recent rally higher in the euro.

So, from a technical perspective, that down move is confirmed and likely to have more room to the downside to go, but after such a big drop, it’s prudent to be cautious with entry with no major catalysts ahead to push the pair lower at a fast pace.

If you’re a bear on the pair, consider waiting for a bounce to the broken support level before shorting, or scaling into a short position to limit your risk and build a position at a better price.

For the bulls out there, there’s no argument at the moment for a long position, other than potential profit-taking at these extended levels. Even then, it’s probably best to wait for bullish patterns to form, preferably on a retest of the next support area around 1.1650.

It’s also likely you’ll need a fresh catalyst to get traders to drop their bearish Sterling bias, so be on the lookout for headlines showing the EU and U.K. more willing to work with each other on Brexit.