Sentiment is souring on Sterling once again as Brexit developments continue to point to an impasse between U.K. government and parliament. Time to take a shot at GBP/CHF?
Intermarket Snapshot
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Fresh Market Headlines & Economic data:
- Theresa May to bring Brexit vote back after pledge to resign
- Brexit: Process in deadlock as MPs seek consensus
- UK consumer sentiment falls to five-year low – EU survey
- Euro area Annual growth rate of broad monetary aggregate M3 increased to 4.3% in Feb 2019 from 3.8% in Jan
- Euro-Area Sentiment Drops for Ninth Month Amid Bleaker Outlook
- GDP Q4 final reading up 2.2%, as expected, but leaves full year short of Trump’s goal
- US weekly jobless claims unexpectedly fall
- US Pending home sales drop 1% in February, despite lower mortgage rates
- U.S.-China trade talks have made progress on all fronts: report
- New Zealand business confidence down again according to ANZ Business Outlook Survey
Upcoming Potential Catalysts on the Forex Calendar:
- Swiss National Bank’s Maechler speaks in Zurich at 5:00 pm GMT
- RBNZ Governor Orr speaks in Wellington at 8:00 pm GMT
- Fed’s Bullard speaks in Madison at 9:30 pm GMT
- New Zealand building permits at 10:45 pm GMT
- Japan core CPI & unemployment rate at 11:30 pm GMT
- Japan industrial production & retail sales at 11:50 pm GMT
- U.K. current account & housing data at 9:30 am GMT (Mar. 29)
What to Watch: GBP/CHF
After a bounce in the British pound yesterday after British PM Theresa May offers to quit if her Brexit deal is passed, it looks like it’s still not enough to get the DUP and ERG to vote for her deal, which is likely why we’re seeing Sterling taking a hit in today’s trade. So it’s likely the bears will stay in control for now, which makes the bounce in GBP/CHF an attractive short-term setup for now.
On the one hour chart above, we can see the pair made fresh March lows last week just above 1.2900 before bouncing higher and consolidation for a few sessions around the 1.3100 – 1.3200 handles, which is also the Fibonacci retracament area of the recent swing move lower. It looks like the pair is breaking below that consolidation area on this latest shift in Sterling sentiment, so bears may want to consider this area for a potential short setup.
It’s interesting because with a daily ATR of around 130 pips, a move back to the previous swing low around 1.2900 is a solid 1:1ish risk-to-reward that’s doable within a few sessions. And if it breaks below that area, the next major support area is not likely seen until 1.2400 – 1.2600.
For the bulls, it’s gonna take a shift in U.K. parliament’s stance on Theresa May’s deal to get bullish again on GBP/CHF, which is a very low probability at the moment. But you never know with the Brexit drama; surprises come almost every single day so it’s best to stay alert and be ready to move in case the news gives us something worth buying the pound over.
