The GBP/CHF is currently trading 220 pips lower from where we left it last on April 12th. When the article Panic Room was written, we were looking for a breakout of support and a continuation of our trend. Where we stand today, the pair is still trending downward and a new low has been established. As of the new May 5th low our trend has reached an astounding 6758 pip move!
The cable continues to show weakness across the board, trading lower against the Swiss, Yen, and Dollar for the month. Fundamental data has not improved for the Sterling either this week, validating our opinion. GBP industrial production (MoM) was released at .3% on Thursday. This was much lower than the 1.1% growth that was expected. Next week’s Economic Calendar brings GBP CPI; a disappointing figure here could propel losses further for the Pound.
Price Action
Looking to our 4hr chart we can see the GBP/CHF Chunneling upward towards short term resistance. Price has tested the 1.4500 level twice at this time but failed to continue trading higher. Support is currently sitting near 1.4400 where price is currently threatening to break lower. A price breakout lower would indicate a potential test of the May 5th low at 1.4112.
Trading Opportunity
My preference is to use entry orders and prepare for a break of support under 1.4400. Entry orders should be placed below 1.4340 to confirm price has broken the previous 4hr low. Our initial stop will be placed above newly created resistance near 1.4470. Our profit target can be set near the previous low at 1.4130 for a clear 1:2 Risk/ Reward ration.
Alternative scenarios include price testing higher and entering into the trend near short term resistance over 1.4500
Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email instructor@dailyfx.com to be added to the distribution list.
