GBP/CHF tumbled yesterday, after it hit resistance near 1.3035. The slide brought the rate below the key support (now turned into resistance) of 1.2950, a move that confirmed a forthcoming lower low on the 4-hour chart. On the 15th of October, the rate fell below the lower bound of the upside channel that had been containing the price action since the 21st of September, but up until yesterday, it remained supported by the 1.2950 zone. In our view, the break of that level has turned the short-term outlook negative.
A decisive break below 1.2885 may suggest that the bears are willing to stay in the driver’s seat and perhaps push the rate down for a test near the 1.2815 level, marked by the low of the 4th of October. Another move below 1.2815 could carry more bearish implications and perhaps open the path for the our next support of 1.2740, defined by the low of the 2nd of the month.
Taking a look at our short-term oscillators, we see that the RSI hit support near its 30 line, rebounded somewhat, but turned down again. It could fall below 30 soon. The MACD lies below both its zero and trigger lines, pointing south as well. These indicators detect negative momentum and support the notion for some further declines.
Even if the pair recovers back above 1.2950, as long as it stays below the downside resistance line taken from the peak of the 12th of October, we would still see a decent likelihood for the bears to jump in and drive the battle lower. We would like to see a clear break above 1.3035 before we start assuming that the bears are headed towards the exit. Such a break could initially aim for the high of the 16th of October, at 1.3085, or the peak of the 12th of the month, at 1.3115. Another break above 1.3115 could pave the way for the 1.3160 territory, defined by the inside swing low of the 13th of July.
