(MENAFN- Daily Forex)
The GBP/CHF initially fell during the trading session on Friday but then turned around to show signs of life. By doing so, it looks like we are going to form a hammer, and that hammer of course is a supportive candle, and a lot of traders would be paying close attention to this. The British pound may be a soul against the Swiss franc at the moment, and therefore think a short-term rally is likely. It's worth noting that the 1.09 level above is a large, round, psychologically significant trigger, but the true“market memory” could come back into play at the 1.10 level.
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We have already bounced a bit to test the 1.10 level, which is an area that obviously would attract a lot of attention. The fact that we fell from there again does suggest that it will be difficult to break above there, so when I'm waiting to see some type of rally I can start fading again. On the other hand, if we were to break down below the bottom of the candlestick, then it's likely that the British pound drops down to the 1.05 level over the longer term for Signs of Exhaustion
Keep in mind that this pair is highly sensitive to risk appetite, as the British pound is a high-yielding currency anymore, and then you also have to look at the Swiss franc through the prism of a safety currency, and therefore if we have a lot of problems when it comes down to the geopolitical situation like we do now, it makes a certain amount of sense that we would see the Swiss franc be attractive.
All of that being said, if we were to break above the 1.10 level, then it's possible that the market could go looking to the 50-day EMA which is near the 1.11 level. That's an area that previously had been important, so therefore certain amount of“market memory” could come into the picture there as well. In other words, I think it's simply a matter of waiting for signs of exhaustion that you can start selling. I don't necessarily want to chase the trade down here, so I will look for a daily candlestick that shows signs of exhaustion and then start to scale back into a position as there are plenty of things to move the markets out there and have people looking for safety given enough time.
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