GBP/CHF looks overbought after a steep rally.
GBP/CHF staged an impressive rally on Thursday, recouping most of the losses recorded since mid-September and rising well above its simple moving averages (SMA) and the Ichimoku cloud on the four-hour chart.
The forceful upside correction, however, looks fragile as the fast-stochastics and the RSI signal overbought conditions, indicating that the bullish action is running out of steam and downside pressures may occur in the short-term.
To keep the bulls in play, the price needs to hold above 1.2380 and more importantly on top of the 1.2340 former supportive level, with immediate resistance eyed between 1.2438 and 1.2480. Further up, a tougher wall around 1.2535 and where the 50% Fibonacci of the 2019 down-leg from 1.3398 to 1.1670 lies, could also reject any move higher.
A slide under the 1.2380-1.2340 zone may initially pause near the 1.2285 prior resistance level, while a breach of the 1.2238-1.2200 area that provided strong footing during the previous months could open the door for 1.2160. Lower, the 1.2100 level could be another challenging obstacle, a break of which would confirm the violation of the August uptrend and a neutral state in the bigger picture.
In short, GBP/CHF is looking strongly bullish in the short-term but is still exposed to downside risks as Thursday’s rally is viewed as overstretched. A rebound off 1.2380 may keep buyers engaged, while in the bigger picture, the positive sentiment may fade under 1.2100.
All trading involves risk. It is possible to lose all your capital
This information is not considered as investment advice or investment recommendation but instead a marketing communication. This material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.