GBP/CHF Stabilizes Above Key Support Amid Swiss Rate Cut Expectations

Date: Wednesday, June 12, 2024 

Wednesday Market Overview: 

The outlook for a potential rate cut in Switzerland, driven by minimal inflation growth of just 1% as anticipated in the upcoming central bank meeting, has allowed the British pound to stabilize against the Swiss franc. This stabilization comes despite the UK’s zero economic growth in April and the contraction in manufacturing indices and industrial production growth, which were reported on Wednesday morning. 

Technical Analysis: 

On the four-hour chart, GBP/CHF has broken above the recent high of 1.14305, hovering above the 34-period moving average. This breakout has given buyers hope for a bullish reversal. Despite the lack of momentum indicated by the long shadows and short bodies of the recent candles, if buying pressure intensifies, the immediate target would be 1.14456. A sustained break above this level could pave the way for a further corrective rally towards 1.14647. If the bullish trend solidifies, breaking through the 100-period moving average would signal a move towards higher targets at 1.14859 and 1.15201. 

Alternative Scenario: 

Should the resistance at 1.14456 hold firm, a retest of the broken high at 1.14305 is likely. Continued bearish momentum could then see the price test the 34-period moving average around 1.14093 as the second support level. The new bullish trend would be invalidated if the price breaks below the 1.13751 support level. 

Market Overview and Key Levels 

Resistance Levels: 

• Resistance 3: 1.14859 
• Resistance 2: 1.14647 
• Resistance 1: 1.14456 

Current Price (at the time of analysis): 1.14385 

Support Levels: 

• Support 1: 1.14305 
• Support 2: 1.14093 
• Support 3: 1.13751 

Impactful Events: 

Economists surveyed by Reuters expect the Swiss consumer price inflation to decrease from 0.3% last month to 0.1%, with core inflation remaining steady at 0.3%. Meanwhile, the Federal Reserve is widely expected to keep interest rates between 5.25% and 5.5%. Thus, the updated economic forecasts from policymakers, known as the “dot plot,” and Fed Chair Jerome Powell’s press conference are in the spotlight for hints about the timing and pace of rate cuts. 

Oscillators and Risk Warnings: 

• RSI (Relative Strength Index): Bullish, indicating strong buying momentum. 
• MACD (Moving Average Convergence Divergence): Bullish, supporting the upward trend. 
• Moving Averages: Mixed, reflecting current market uncertainty. 

Conclusion: 

The GBP/CHF pair’s ability to stabilize above the key support level at 1.14305, despite mixed economic data from the UK, suggests underlying strength driven by expectations of a rate cut in Switzerland. Technically, a break above 1.14456 could signal further upside potential, targeting higher resistance levels. However, if this resistance holds, a retest of lower supports could be expected. 

Investors should closely monitor the upcoming Swiss inflation data and Federal Reserve announcements, as these will provide critical insights into future monetary policy directions and market sentiment. By keeping an eye on these economic indicators and the outlined technical levels, traders can better navigate the current market dynamics effectively.