GBPCHF: Key Support Line Tested as Divergence in GBP Caused Steep Bearish Momentum in Cross Pair
The daily candle chart below shows the price history of the Great British Pound (GBP) versus the Swiss Franc (CHF). This currency pair is known as GBPCHF and is trading near 1.4987 around time of publication today.
Last time this pair was reviewed in the Ideas You Can Trade series, GBPCHF was trading closer to 1.52, earlier in June this year.
As a number of currencies have recovered slightly against the US Dollar in the last few days, a divergence in the GBP occurred where it continued to weaken despite the smaller recovery in the USD. This divergence appears to have caused the move of the last several days in the GBPCHF and making it to fall sharply from above 1.5410 to current levels.
Static support is now being tested on 1.4970 - a level that has reversed prior bearish momentum - and will therefore be a key level to watch in discerning the next step for the GBPCHF pair.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.4990 with a Limit to take profit @ 1.5021 and a stop-loss @ 1.4959 Risk/Reward Summary: Limit risk = +31 pips profit / (-31) Stop-loss risk = Gain to Loss ratio = 1.00
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.4959 with a Limit to take profit @ 1.4907 and a stop-loss @ 1.5008 Risk/Reward Summary: Limit risk = +52 pips profit / (-49) Stop-loss risk = Gain to Loss Ratio = 1.06
Medium term daily candle chart: