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GBP/CHF Sellers Retreat as UK Employment Rises

GBP/CHF Sellers Retreat as UK Employment Rises

Market Overview

On Tuesday, data from the UK showed that wage growth during the three months leading to July slowed to its lowest point in over two years, while employment increased. The Office for National Statistics reported that average weekly earnings, excluding bonuses, were 5.1% higher than the same period last year. This figure aligns with market expectations but represents the lowest increase since the three months ending in June 2022. Despite the slower wage growth, the pound has gained short-term strength against major currencies, including the Swiss franc.

This data suggests that the Bank of England (BoE) may stay on track to cut rates before the end of the year. In August, the BoE held interest rates at a 16-year high of 5.25% but signaled a focus on closely monitoring wage growth. Investors currently see a 25% probability of a rate cut in September, a factor that has contributed to the pound’s recent rally.

Meanwhile, the Swiss franc has been relatively stable, continuing its status as a safe-haven currency amid global uncertainties. However, rising UK employment and the softening of wage pressures may give the pound further momentum in the near term.

Technical Analysis

On the four-hour chart, GBP/CHF is trading within a downward channel. The recent price action indicates that sellers have retreated, and buyers are attempting to take control. Buyers are now challenging the 1.11171 resistance level, which lies just above the 34-period moving average. If they succeed in breaking this level, the next target will be 1.11287, with further momentum possibly driving the pair toward the 1.11461 level, where the 100-period moving average intersects with the 161.8% Fibonacci extension of the last bearish swing.

At this point, selling pressure is expected to increase. However, a break above this zone could invalidate the downtrend and lead the price toward 1.11597 and eventually 1.11887.

Oscillator Confirmations

RSI: The Relative Strength Index (RSI) is neutral, suggesting a balanced market with room for upside movement.

MACD: The Moving Average Convergence Divergence (MACD) is mixed, indicating a potential shift in momentum but without a clear signal.

Moving Averages: Both the 34-period and 100-period moving averages remain aligned with the broader downward trend, although buyers are testing key levels.

Alternative Scenario

If sellers regain control and maintain the downward channel, GBP/CHF could fall toward the 1.11008 support level. A break below this would open the door for a move down to 1.10745. A further breakdown of this support would invalidate the bullish outlook and likely lead to a retest of the September 6 low.

Key Levels Overview

  • Resistance Levels:
    • Resistance 5: 1.11887
    • Resistance 4: 1.11597
    • Resistance 3: 1.11461
    • Resistance 2: 1.11287
    • Resistance 1: 1.11171
    • Current Price: 1.11136
  • Support Levels:
    • Support 1: 1.11008
    • Support 2: 1.10745

Key Events to Watch

Stronger-than-expected UK employment data has bolstered the pound. Traders will now turn their attention to the UK’s economic growth report on Wednesday, which is forecasted to show a 0.2% expansion in July, an improvement from the previous month. Additionally, industrial and manufacturing production figures will be released, potentially adding volatility to the pound. These reports, combined with broader market sentiment, could drive GBP/CHF toward either key resistance or support levels.

Conclusion

GBP/CHF is at a pivotal point, with buyers gaining momentum after a retreat by sellers. Key resistance levels at 1.11171, 1.11287, and 1.11461 are the immediate hurdles. However, if sellers reassert control, the pair could fall back toward the 1.11008 and 1.10745 supports. The UK economic data due on Wednesday will likely play a significant role in determining the next direction for GBP/CHF.

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