The GBPCHF has continued its strong rally as visible in this D1 chart. This currency pair has now formed a rising wedge formation which is a bearish chart pattern. We expect the GBPCHF to start a correction from its ascending resistance level where it currently trades back down to its ascending support level which is enforced by its 50 DMA.
MACD indicates that momentum has topped out and did not confirm the higher high set which makes the current rally vulnerable for a correction. RSI has formed a negative divergence and trades in overbought territory. A breakdown should initiate the sell-off.
We recommend a short position at 1.4800 which would be an add-on to our two previous short positions which we took on July 31st and September 3rd at 1.4075 and 1.4600 respectively. We also recommend a stop buy order at 1.4875 with a take profit target of 1.5000 in order to hedge this trade.
Traders who wish to exit this currency trade at a loss are advised to place their stop loss level at 1.4950. We will not use a stop loss order and execute this trade as recommended. Place your take profit target for all short positions at 1.4300.
Here are the reasons why we call the GBPCHF currency pair lower
- The GBPCHF has formed a rising wedge formation which is a bearish chart pattern
- MACD indicates that momentum has topped out and does not confirm the higher high
- RSI has formed a negative divergence and currently trades in overbought territory
- Profit taking after a strong rally in order to realize trading profits
- New short positions by institutional swing traders