FTSE 100
I have long argued here that the GBPCHF pair is on the verge of breaking higher. The long-term horizontal consolidation following a sharp move from the lows pointed to a bullish breakout.
The breakout is here. The cross trades above 1.22 for the first time since June, and the big question is – can it move even higher?
One of the reasons for the bullishness in the GBPCHF cross is the pound’s strength. It pushed higher in the last weeks, reaching close to 1.35 today – who would have thought possible at the start of the coronavirus pandemic?
Yet, the resilience of the U.K.’s economy, the perspective of a Brexit deal, coupled with the CHF resilience to fall made the GBPCHF breaking resistance.
Swiss Retail Sales took the market by surprise this week. They rose by 4.1% on expectations of 0.9%. So did the Manufacturing PMI – up to 51.8, above contractionary levels.
Why is this negative for the CHF? The CHF is viewed as a safe-haven currency. When economic releases disappoint negatively, the CHF appreciates. And the other way around.
Because the Swiss economy is a developed economy, it acts as a benchmark for the rest of the developed world. Hence, positive Swiss data implies positive data on peer economies, hence negative for the CHF.
The 1.20 level acted as major resistance. It means that on any move lower, it should act as support, but also as an invalidation level if the market is strong enough to push through it.
To trade the measured move of this continuation pattern, stay long for 1.30 with a stop-loss at 1.1920. To find out the appropriate volume for the trade, divide the number of pips needed for the stop-loss in such a way so that the eventual invalidation will not affect the trading account by more than 1%.
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