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I’ve spotted another neat break-and-retest setup on a pound pair! What do you guys think of this correction play on GBP/CHF?

This pair recently made an upside breakout from its descending trend line on the 4-hour time frame, signaling that the downtrend is over and that a reversal is in the cards.

Price might need to pull back to the broken resistance level, though, and applying the Fib tool shows that the 50% level might hold as support.

GBP/CHF 4-hour Forex Chart
GBP/CHF 4-hour Forex Chart

This level lines up with the 1.3800 major psychological support, which has held as an area of interest in the past. Stochastic is already hovering close to the oversold area so sellers might need to take a break and let buyers take over soon.

As for fundamentals, the pound still seems to be in the middle of erasing its losses spurred by Brexit concerns. Meanwhile, SNB head Thomas Jordan’s speech reiterated that the franc is still significantly overvalued and that they’re willing to go beyond their usual monetary policy tools in order to limit the currency’s gains.

Because of that, I’m thinking that GBP/CHF could have room to head further north, possibly until the nearby area of interest at the swing high or even until the next resistance around 1.4800. Here’s my plan:

Long GBP/CHF at 1.3825, stop loss at 1.3475, profit target at 1.4275. I’ll be risking 0.5% of my account on this setup for a potential 1.28-to-1 return-on-risk.

Remember to never risk more than 1% of a trading account on any single trade and to adjust position sizes accordingly. Create your own ideas, don’t simply copy what I do, and make sure you’ve read our risk disclosure!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.