I’ve got GBP/CHF on my forex watchlist earlier this week because the pair was testing long-term range support. With the BOE statement coming up, I’ve zoomed in to the 1-hour chart to spot potential entries.
The pair recently surged past the area of interest around the 1.2900 major psychological level then came close to 1.3200 before retreating. Price appears to be finding support around the 38.2% to 50% Fib levels, which might keep losses in check from here.
If so, the pair could complete an inverse head and shoulders pattern, adding confirmation that a rally might take place. To top it off, I’m seeing a bullish divergence as GBP/CHF made higher lows while stochastic had lower lows.
Of course, I’m wary of the upcoming BOE statement since a good number of analysts believe that the U.K. central bank would cut interest rates by 0.25% this time.
Others think that MPC members would sit in their hands and wait for their August meeting instead. In that case, the pound might regain ground on expectations that the Brexit talks could proceed smoothly.A bit of political stability was restored in the U.K. now that new Prime Minister Theresa May has taken office. May has already announced her cabinet members and stressed the need to start working on the Brexit plans as soon as possible, allowing the pound to stay supported.
Meanwhile, the Swiss franc is always under intervention watch, as traders worry that any sharp rallies could force the SNB to step into the currency market once more.
I’m still expecting additional volatility right around the time of the BOE decision so I’ll be patiently watching to see if the Fibs hold then. If the pound shows strength at that time, I’ll be ready to hop in at the market and aim for the middle of the longer-term range around 1.4000-1.4100.
I’ll keep y’all posted on my trade entries through my Twitter account. 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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