GBP/CHF traded in a consolidative manner on Tuesday, staying fractionally above the 1.2500 hurdle. In the somewhat bigger picture, the pair remains within the sideways range that’s been containing most of the price action since the 10th of December, between 1.2380 and 1.2600, but it is also trading below the downside resistance line drawn from the high of the 19th of November. Thus, although the sideways action suggests a neutral near-term outlook, we see more chances for the rate to trade lower rather than higher.
If the bears are strong enough to eventually overcome the 1.2500 zone, we may see them aiming for the lower end of the aforementioned range, at around 1.2380. A dip below 1.2380 may signal the downside exit out of the range and could carry extensions towards the 1.2290 level, marked by the low hit during last week’s “flash crash”.
Our momentum studies support the latest consolidative action and that’s why we prefer to wait for a move below 1.2500 before we get somewhat more confident with regard to a leg lower, at least towards the range’s lower boundary. The RSI slid near its 50 line and now sits comfortably there, pointing sideways, while the MACD, lies fractionally above zero, and slightly below its trigger line, pointing east as well.
In order to start examining whether the near-term picture has turned positive, we would like to see a clear close above 1.2650. Such a move could confirm the upside exit out of the range, as well as the break above the downside resistance line taken from the peak of the 19th of November. This could encourage the bulls to drive the battle towards the 1.2760 resistance, the break of which may allow them to lift the pair slightly higher, near the 1.2815 zone.
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