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Short-Term Forex Technical Outlook: GBP/CHF (Update)

Thursday, 08 January 2009 11:30:13 GMT  |  David Song, Currency Analyst

Deteriorating fundamentals have dragged on the British pound over the last three months of trading, and the interest rate outlook for the U.K. continues to favor a bearish outlook for the GBPCHF.

Currency Pair: GBP/CHF
Chart: 60 Min Charts
Short-Term Bias: Bearish

Analysis Update

The GBPCHF spiked higher immediately following the 50bp cut by the Bank of England, but the lack of momentum to break above 1.6910 (50.0% Fib retracement level) suggests that investors remain bearish against the pair. As investors remain risk adverse, I anticipate the Swiss franc to benefit from its safe haven status, and we may see the pair break below 1.6480 (38.2% Fib retracement level) over the following week to fill in the gap from the 120 SMA. A move below this level could drag the pair towards the 12/24 low of 1.5776 over the following week. However, the fundamental event risks scheduled for the next 24 hours may call for a change in our outlook.

Analysis

Deteriorating fundamentals have dragged on the British pound over the last three months of trading, and the interest rate outlook for the U.K. continues to favor a bearish outlook for the GBPCHF. After reaching a high of 1.8706 in December, the pair slipped to a low of1.5124 on 12/29, but the British pound snapped back to pick up 900+pips against the Swiss franc this week. The sharp retracement pushed the RSI into oversold territory throughout the week, which suggests that the pair will continue to hold its bearish trend. Over the remainder of the week, I anticipate the pound-franc to face increased selling pressures as the Bank of England is widely expected to deliver a 50bp rate cut, and expect the pair to fill in the gap from the 120 SMA. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.

To contact the author of this article, please email: dsong@fxcm.com

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