The GBPCHF is one of the currency pairs that consolidated the most in 2020. This is something new for a currency pairs known as having one of the biggest ATR (Average True Range) in the currency market.
However, uncertainty related to Brexit, coupled with investors seeking safe-haven in the CHF, brought consolidation just below the 1.20 level. We can safely state that the 1.20 level is critical for the cross, with many long-term investors waiting for the market to close above and hold the level before anything.
Despite the month-long consolidation, the pair finds bids on every dip. This week is of particular importance for the British pound as the so-called EU Brexit Summit takes place on October 15-16.
The summit marks the self-imposed deadline for a Brexit solution. Considering the recent developments and the EU triggering the infringement procedures against the United Kingdom, the news coming out from the summit will likely trigger ample GBP moves.
Another thing to consider the SNB intervention to weaken the CHF. It recently revealed that in 2020 so far, spent the most since 2015 on FX interventions, telling much about investor’s desperate need for safe-haven assets.
The technical picture looks bullish as long as the price keeps an eye on the 1.20. A break higher above the b-d trendline and the 1.20 level leads to buying pressure for the measured move of a bullish flag.
To trade it, bulls may want to wait for the price to break the smaller consolidation area seen in the recent triangular formation. Once the price pops higher and closes above the 1.20 on a daily basis, bulls may want to go long for a medium-long-term horizon as the measured move points to 1.30. On the flip side, a move below 1.1575 invalidates the bullish setup.
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