Key Points:
- Bearish channel ready to make its presence felt once again.
- EMA bias firmly bearish moving ahead.
- Brexit and Trump could keep the pair suppressed for the foreseeable future.
The GBP/CHF is once again drawing close to a likely reversal point which could spell some sizable losses for the pair. This forecast largely stems from a number of technical factors which are now suggesting that said reversal and subsequent decline are overdue. Moreover, given a number of long-term fundamental forces coming into play, considerable losses for this pair seem all but assured.
Starting with some of the pertinent technicals, a rather blazon bearish channel remains a dominant feature of the GBP/CHF’s daily chart and it looks far from ready to dissolve. As a result of this, we are already beginning to see the recent surge in buying momentum run dry as that upside constraint makes its presence felt.
Having weathered multiple attempts at a breakout in months past, the pair should remain predisposed to sliding lower in the coming sessions which will not have gone unnoticed by the bears currently in the wings.
If needed, further evidence casting doubt on the chances of a breakout can be found by taking a look at both the Bollinger bands and the RSI readings. Specifically, the relatively divergent bands would typically indicate that the probability of a near term breakout is fairly remote. Meanwhile, the four-hourly RSI readings are moving firmly into overbought territory which will be capping any optimism of a push beyond that key 23.6% Fibonacci retracement.
What’s more, as is shown above, the current placement of the 100 day moving average should lend some dynamic resistance to the upside constraint and limit chances of a breakout. Furthermore, even with the recent spate of bullishness, the 12 and 20 day averages are yet to shake their bearish bias which will be giving the bulls pause for thought moving ahead. Combined, these technicals are highly suggestive of a reversal that will likely only be prevented by a rather sizable fundamental upset coming to pass.
Speaking of fundamentals, the resumption of the long-term downtrend would come as little surprise given the ever-present threat of Brexit which looms over all GBP crosses. However, as the Trump presidency moves into high-gear, safe havens such as the Swiss franc could also receive a boost in popularity as well which would compound this pair’s downside risks. As a result, short of an announcement that Brexit is not going to happen, the bias remains firmly bearish on both the fundamental and technical fronts.