GBPCHF has carried on with its climb ever since breaking above the neckline of an inverse head and shoulders pattern on its longer-term charts. Price is now moving above an ascending trend line connecting the recent lows of price action.
However, the pair appears to have encountered near-term resistance, prompting profit-taking activity and a correction opportunity to the trend line. Applying the Fib tool on the latest swing high and low shows that the 61.8% level lines up with the trend line around the 1.4150-1.4200 levels.
This area also coincides with a former resistance or the neckline of the reversal formation, which might now hold as support. Stochastic is already indicating oversold conditions with a bullish divergence, signaling that buyers could hop in the uptrend sooner or later. RSI, on the other hand, is still on the move south so the retracement is still in play for now.
A bounce off the trend line support could lead to a climb up to the previous highs near the 1.4500 major psychological resistance and beyond. The BOE Inflation Report is scheduled today and the central bank’s rhetoric could add volatility to this pair’s price action. Switzerland is also set to print its trade surplus today and a wider deficit is eyed.
Brexit-related headlines have been influencing pound price action recently as the EU referendum is less than a month away. Opinion polls are suggesting a widening lead in favor of those voting to stay in the EU, especially after policymakers and government officials have been warning how a Brexit could lead to economic uncertainty and job losses.
The UK Treasury recently warned that exiting the EU could spur as much as 820K job losses, a year-long-recession, and a 15% decline in the pound’s value. This has weighed on the UK currency earlier in the week, but it might wind up encouraging more voters to favor staying in the region and allow the pound to recover.
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