Intraday Market Analysis: Analysing GBPCHF Retracement

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GBPCHF Intraday Strategy

GBP in general has suffered from heavy losses in the Forex market. While the majority of CHF pairs and crosses have posted a moderate recovery GBPCHF was unable to correct higher. We believe the trend is about to change based on the 4hr chart.

GBPCHF 4hr Chart

Please click on the chart to enlarge:

GBPCHF 4hr Chart 28/08/15

GBPCHF 4hr Chart 28/08/15

As you may see from the chart GBPCHF has painted a classic double-bottom reversal pattern. In order to affirm the gains the price must firmly break above 1.4891 to trigger the much-needed recovery.  With that being said, the broader outlook for GBPCHF remains bearish. The weakness was initiated upon the formation of the top Head-And-Shoulders (H&S) reversal pattern. The 100% objective of the top H&S is seen at 1.4500, which has not been met at the time of this writing. Of course, the price does not have to meet the objective of the reversal, however, that cannot be affirmed at the time of this writing.

These are the possible scenarios for GBPCHF. A firm break above 1.4891 with a successful re-test of the breached resistance may yield a moderate recovery that may drive the price to 1.5067. While the target of the reversal is seen at 1.5170 we are still under the impression the broader outlook is bearish. A re-test of 1.5170 and a failure to break above may affirm our bearish stance and may indicate the resumption of the downtrend. The target in such a scenario would be 1.4500, which is the objective of the top H&S.

The alternative is GBPCHF held between 1.4659 and 1.4891. While some intraday traders may opt for playing short trades off the resistance and long trades off the support via shorter time frames, if the range is indeed affirmed it will paint a possible bearish flag where a break below 1.4659 paves the way for another leg lower towards 1.4500. At this stage it is difficult to assess which scenario is most likely to occur. Jackson Hole may play a major role in GBPCHF. If Jackson Hole fail to impact GBPCHF we are certain the US Non-Farm Payrolls (NFP) next Friday will ensure our intraday strategy will kick in.

While the trading strategy has been layered on the 4hr chart, day traders may use lower time frames to concrete their entries. This strategy is not designed for scalping.

30/08/15 UPDATE: The intraday resistance (1.4891) prevented the bulls from sustaining the gains in GBPCHF, which resulted in immediate weakness.

Please click on the chart to enlarge:

GBPCHF 4hr Chart 30/08/15

GBPCHF 4hr Chart 30/08/15

The strategy remains relevant. The key levels are the support (1.4659) and resistance (1.4891) levels as described in the strategy.

09/09/15 UPDATE: GBPCHF was locked inside a tight range, offering multiple opportunities when the resistance was tested by the market. Eventually the price broke above and acquired our bullish target. We should say it was not an easy task to capitalize over the breakout unless a buy stop order was placed above the resistance.

Please click on GBPCHF chart to enlarge:

GBPCHF 4hr Chart 09/09/15

GBPCHF 4hr Chart 09/09/15

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