GBPCHF: Support line of Bullish Channel Comes Under Pressure For Trend To Persist
The daily candle chart below shows the price history of the Great British Pound (GBP) versus the Swiss Franc (CHF). This pair is known as GBPCHF, and last traded near 1.4509 as the trading week came to a close on Friday.
The pair had been trending within an ascending channel and bouncing on the lower bullish support line, which was just tested for the first time since December and causing the pair to briefly reach below 1.4500 this Friday.
The intraday low of 1.4464 doesn't appear to have been support, instead the recovery to regain 1.4500 held as support alongside the lower line of the bullish channel (point 2 in green on chart), acted to prevent a furth drop during the trading session (after it was regained).
GBP could continue its pattern within the bullish channel if support holds, and with a bullish bounce that could follow off this line and similar in slope to prior bounces from the support line of the bullish channel (such as point 5 on the chart in the color aqua).
If this line fails, however, and the pair exits the bullish channel, a continuation using the trajectories of the short term bearish channel (point 3 in the color magenta on chart) could aim the GBPCHF towards 1.40 by mid-April.
Last time the GBPCHF was covered in this series it had traded around similar levels, and with dynamic support coinciding near a static support line, contrarian traders may look for a reversal whereas trend follower might expect a breakout to the downside.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.4566 with a Limit to take profit @ 1.4617 and a stop-loss @ 1.4515 Risk/Reward Summary: Limit risk = +51 pips profit / (-51) Stop-loss risk = Gain to Loss ratio = 1.00
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.4477 with a Limit to take profit @ 1.4406 and a stop-loss @ 1.4519 Risk/Reward Summary: Limit risk = +71 pips profit / (-42) Stop-loss risk = Gain to Loss Ratio = 1.69
Medium term daily candle chart: