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GBP/CHF Bears Face Key Support in Cautious Market

GBP/CHF Bears Face Key Support in Cautious Market

Market Overview

This week, the Swiss franc (CHF) has remained stable, maintaining its status as a safe-haven currency amid global uncertainties. The franc continues to perform well against major currencies like the US dollar (USD) and the euro (EUR), reflecting strong economic stability and investor confidence in Switzerland’s financial policies.

Several factors support this stability:

Recent policy decisions by the Swiss National Bank (SNB)

A favorable global economic environment

The SNB’s actions show a careful balance between managing inflation and sustaining economic growth, which has helped maintain the franc’s value. In contrast, the British pound (GBP) has been weaker against the franc, despite some gains against the USD and EUR. This difference is mainly due to the franc’s safe-haven status, making it more attractive during times of geopolitical tension and economic uncertainty.

Technical Analysis

On the daily chart, the GBP/CHF pair’s recent upward movement has stalled at the 34-day moving average, suggesting a pause in the upward momentum. Sellers are currently testing the critical support level at 1.11051. A close below this level could signal a double-top pattern, indicating a potential reversal and a possible further decline.

If the price falls below 1.11051, the next target would be 1.10731. Continued bearish momentum could push the pair toward lower support levels at:

1.10259

1.09875

1.09074

These levels correspond with the 161.8%, 200%, and 261.8% Fibonacci extensions of the recent upward swing, suggesting the depth of the decline if bearish sentiment continues.

Oscillator Confirmation

RSI (Relative Strength Index): The RSI is neutral, indicating no strong momentum in either direction. This could mean a period of consolidation or indecision, possibly leading to a breakout or a new trend.

MACD (Moving Average Convergence Divergence): The MACD is mixed, reflecting market uncertainty. Although there is some bearish pressure, it is not dominant. This highlights the potential for volatility and the need to monitor key support and resistance levels closely.

Moving Averages: The moving averages are bearish, with the price trading below the 34-day moving average. This suggests the path of least resistance is downwards unless market sentiment shifts significantly.

Alternative Scenario

If buyers defend the 1.11051 support level, a reversal could occur. For a bullish outlook, GBP/CHF would need to break above the 1.11500 resistance and the 34-day moving average. A sustained move above this level could signal that buyers are regaining control, potentially targeting the 1.12227 resistance level. A break above this resistance would invalidate the bearish double-top pattern and could trigger a resumption of the uptrend.

Key Levels

Resistance Levels:

Resistance 2: 1.12227

Resistance 1: 1.11500

Support Levels:

Support 1: 1.11051

Support 2: 1.10731

Support 3: 1.10259

Support 4: 1.09875

Support 5: 1.09074

Key Events to Watch

Investors should monitor the following economic reports, which could impact the GBP/CHF pair:

Inflation Reports from Major Euro Economies: These reports could influence the euro and, by extension, the Swiss franc. Any unexpected results could lead to increased volatility in EUR and CHF pairs.

UK Money Supply and Mortgage Lending Data: Scheduled for release later today, these figures will provide insights into the UK economy. Significant deviations from expectations could influence GBP performance.

Swiss KOF Economic Barometer: This composite indicator, derived from 12 macroeconomic indicators, will be released on Friday. It forecasts Switzerland’s economic activity for the next six months and could significantly impact the CHF depending on whether it meets, exceeds, or falls short of market expectations.

Conclusion

The GBP/CHF pair is at a crucial point, with sellers challenging a key support level. The outcome of this test will likely determine the pair’s direction in the near term. While technical analysis suggests a bearish bias with potential declines if support levels are breached, the market remains cautious. Upcoming economic reports and central bank communications will be pivotal in shaping investor sentiment and could trigger a breakout in either direction. Traders should stay alert, keeping a close watch on technical levels and fundamental developments that could influence the pair’s trajectory.

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