Technical Analysis – GBPCHF remains negative but bulls reemerge before breach of swing low

Anthony Charalambous, XM Investment Research Desk

GBPCHF reversed back down from the high of 1.2476 after a one-month rally, driving the price below the simple moving averages (SMAs) and the Ichimoku cloud, until the 1.2200 swing low, where the price halted, following a push higher from buyers.

The momentum indicators are reflecting easing in the short-term negative momentum. The RSI has bounced off the 30-level and is pointing up, while the MACD in negative regions is marginally above its red trigger line. That said, the oscillators’ decreasing negative momentum contradicts the bigger bearish signals coming from the SMAs, which have completed bearish crosses.

To the downside if the bears manage to move below the 1.2200 psychological level, the next support comes at 1.2168, which is the 38.2% Fibonacci retracement of the up leg from 1.1671 to 1.2476. Penetrating below the 1.2100 barrier, the near term 50.0% Fibo of 1.2074 is on the cards. With another sell-off, the support region of 1.1860 – 1.1850 could draw traders’ attention once the 61.8% Fibo of 1.1978 is surpassed.

In the positive scenario, if the 1.2200 support restricts further losses, the push up is faced with initial resistance coming from the 20-period SMA before the nearby Kijun-sen, 100-period SMA and the 23.6% Fibo of 1.2286. Moving higher, resistance could come from the 50-period SMA, which coincides with the lower boundary of the Ichimoku cloud. Only if price action overcomes the Ichimoku cloud could the peak of 1.2476 be revisited.

Overall, for the pullback to turn the short-term from bullish-to-bearish, the price would need to break below the 1.2200 handle. On the other hand, a move above the peak of 1.2476 would shift the bias back to neutral.