The GBPCHF has been trading in a rectangular chart pattern as visible in this D1 chart. This currency pair has now approach its horizontal support level from which we expect it to initiate a mover higher back into its horizontal resistance level which is enforced by its 200 DMA. A breakout above this level would allow the GBPCHF to form a double top and a potential reversal from there.
MACD has confirmed the last move lower and has been trading in bearish territory, but bearish pressures have started to recede and MACD has formed a slight positive divergence which suggests a trend reversal. RSI has been trading in oversold territory and a breakout from here should add to the pending reversal.
We recommend a long position at 1.4275 with a potential second entry level at 1.4125. We also recommend a stop sell order at 1.4200 in order to hedge the initial long position and before adding additional long trades.
Traders who wish to exit this currency trade at a loss are advised to place their stop loss order at 1.4175. We will not use a stop loss order and execute this trade as recommended. Place your take profit level at 1.4525.
Here are the reasons why we call the GBPCHF currency pair higher
- The GBPCHF has been trading in a rectangular chart pattern and currently trades at its horizontal support level
- Price action indicates valid support as the latest candlestick pattern formed an inverted hammer at support
- MACD shows bearish pressures are fading and has formed a positive divergence which suggests a directional reversal
- RSI is trading in oversold territory and a breakout is pending
- Better economic data out of the UK especially on the consumer front
- Short covering rally in order to realize profits
- New institutional long orders by swing traders off of good support levels