GBPCHF Correction Levels in Play

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GBPCHF recently fell through a rising trend line connecting the lows since July, signaling that a downtrend is in play. Price is in the middle of a correction, though, and might need to gather selling pressure at the Fib levels.

The 38.2% Fib is at 1.1838 while the 50% level is at 1.1912. The 61.8% level is close to the broken trend line, which might hold as resistance moving forward. If any of these are able to keep gains in check, a drop to the swing low at 1.1600 could follow.

The 100 SMA is crossing below the 200 SMA to indicate that the path of least resistance is to the downside or that bearish momentum is picking up. Price is moving below these indicators as additional confirmation of selling pressure.

Stochastic has made it to the overbought region to signal exhaustion among buyers, and turning lower could mean that sellers already have the upper hand. RSI is on the move up, though, and has some room to climb before indicating overbought conditions.

Sterling has been on weak footing as Brexit talks have been falling through, leaving the UK economy at a weaker position upon exiting the union. Data from the UK has been upbeat so far, though, as the claimant count change showed a lower increase than expected. CPI readings are up for release next and strong results could keep the pound supported.

Still, a return in risk-off flows could be bullish for the safe-haven franc, which has been able to take advantage of dollar weakness and risk aversion in the past weeks. There are no major reports due from the Swiss economy, so market sentiment could be the franc’s main price action driver, although any threats of currency intervention could derail rallies.

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