Trade Of The Week: GBPCHF To Test Key Resistance


GBPCHF has been under heavy pressure since November last year as a combination of unwinding UK rate-hike expectations and deteriorating global risk sentiment have seen GBP sold against the safe-haven Swiss Franc. The reversal in UK wage growth momentum alongside a declining inflation outlook stemming from further Oil price weakness, has placed firm pressure on Sterling as investors continue to push out UK rate-hike expectations, which have now moved from late H2 2016 into H1 207.

In contrast to these moves, the Swiss Franc has benefited from the market volatility and investor uncertainty driven by the intensification of global-growth concerns, with continued Oil weakness and concerns surrounding the slow-down in China driving safe haven demand for the Swiss Franc. Last week saw a sharp reversal in these themes however as a rebound in risk sentiment, fuelled by global stimulus expectations, saw a sharp short-covering rally in GBPCHF, however unless the fundamental landscape alters dramatically it appears likely that GBPCHF will once again head lower as Brexit concerns, domestic economic data and diminished UK rate-hike expectations keep pressure on the medium-term GBP outlook. Similarly, any renewed down-turn in Oil, data weakness from China or rising geo-political tensions will see CHF safe-haven demand back in action.

Trade Idea

The rally in GBPCHF has taken price back up to just shy of a major technical resistance level formed at the August & December 2015 lows. Selling interest is expected to re-emerge at a test of this key level (1.46-1.47)

I am will be monitoring price action to sell a retest of this resistance level, with a stop above the recent high around 1.4850, targeting a move back down into 1.41 lows. 

  • Update: Short 1.4575 stop 1.4725 – 27/01/2016
  • Update: Stop loss hit 01/01/2016 – 150 pips