GBPCHF looks set to stall
Following the violation of its falling trendline (drawn off Feb’06 high) on the 18 July’06, GBPCHF followed through the next day with a sustained break and close above the range top. This well-defined range has been in place since March this year.
In Nov’04,GBPCHF bottomed out, which was followed by a series of higher highs and higher lows leading to a failed rally and a subsequent sell off ending in the present range. The price objective of this range breakout is around 2.3278.This is established by measuring the height of the range and projecting it from the breakout point. Although this cross looks set to hit 2.3278 level after making a 13-month high(2.3117) on Monday, price action is showing some form of hesitation at this level which also coincides with the magenta horizontal trendline drawn off Sept’05 high. In addition, the momentum indicators overbought conditions on the daily chart at exactly the time that the market is stalling is indicative of a market that is running out of steam.
Figure 1: Daily Chart
Figure 2: Weekly Chart
So where do we go from here, now that we are beginning to see a weakening momentum? A pullback/correction is likely to be on this cross’s agenda. The initial pullback should be towards 2.2943(July 21’06 low) and if this level gives way, we might see the .382 Ret/range breakout point at 2.2896 as a strong
defense and in case of a deeper correction .50 Ret/former resistance turned support should provide solid support for GBPCHF.
Figure 3: Monthly
All in all, any pullback at this stage should provide a buying opportunity as momentum indicators on both the weekly and monthly charts have turned bullish suggesting that more upside gains is expected.
Happy Trading
Mohammed Isah is a private trader and an independent technical analyst. He initially traded stocks and now primarily focuses on forex. He produces Weekly, Mid-Week and Friday forex technical research which is available at www.tradingmarkets.com/fxtechnicalresearch. He also has a Daily, Weekly and Monthly pivot points reports. You can contact Mohammed on his pivot points reports and other enquiries at: isahmo@gmail.com