GBP/CHF traded higher yesterday, breaking January’s high, which is slightly above the 1.3110 hurdle. Today, the rate accelerated to the upside, overcoming the 1.3170 zone, defined by the highest point of November. Overall, GBP/CHF is trading above a tentative upside support line drawn from the low of January 2nd, as well as above all three of our moving averages. What’s more, after breaking above the downside line taken from the peak of January 27th, the price structure has been higher peaks and higher troughs. Therefore, we would consider the short-term outlook to be positive for now.
We believe that the break above 1.3170 may have opened the way for the 1.3270 obstacle, which acted as a strong resistance zone from June 6th until July 16th. If this time around the bulls manage to overcome that hurdle, then we may experience extensions towards the inside swing lows of March 23rd and April 1st.
Taking a look at our short-term oscillators we see that the RSI crossed above 70 and continues to point up, while the MACD lies above both its zero and trigger lines, pointing north as well. These indicators detect accelerating upside speed and support the notion for further advances. However, given that today’s rally appears somewhat overstretched, we would stay careful of a possible setback, from current levels or after the rate hits the key resistance of 1.3270.
That said, as long as the aforementioned upside support line remains intact, we would still see a decent chance for the bulls to jump back into the action. We would like to see a decisive dip below 1.3010 before we start examining whether the bears have gained the upper hand, at least in the short run. Such a break is likely to initially pave the way for the 1.2945 level, the break of which may allow declines towards the lows of February 14th and 15th, at around 1.2855.
