With Brexit concerns back in the spotlight, I’m looking at this bearish long-term pound setup that might show a bit more momentum in the days ahead.
Short GBP/CHF Idea
I actually had a tough time deciding which pound pair to short as its other currency rivals were also on weak footing. Initially, the Japanese yen seemed like a prime candidate, but I felt wary as Guppy was already testing major support zones.
With that, I swung over to another safe-haven option, which is the Swiss franc. GBP/CHF is currently testing the mid-channel area of interest on its rising trend channel on the daily time frame and has plenty of room to fall until the actual bottom.
Stochastic has been on the move up but seems to be changing its mind midway and could head south again to show that sellers have regained the upper hand.
I’ll probably wait for this pair to break below the 1.3000 handle or even the latest lows at 1.2905 before hopping in a short position until the bottom of the channel around 1.2600.
Pound bears sprung back to action when the EU released its draft withdrawal agreement, which specified a “common regulatory area” in Northern Ireland – something that U.K. officials have staunchly been against.
Apart from that, lingering risk aversion spurred by stronger global tightening expectations after Powell’s speech could also keep propping up the lower-yielding franc.
I’m planning on shorting around 1.2875 and initially aiming for the channel support, with a stop just past the 1.3000 mark. Think this pair has got some selling momentum left?
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