All GBP pairs performed a U-turn today so far, but the GBPCHF trip was epic. It dropped from above 1.19 to 1.1770 on reports that the E.U. plans to send the U.K. formal notice for breaching the obligations assumed so far.
From a technical perspective, the move lower remains part of a possible bullish flag. Because it did not invalidate any levels, the bullish bias persists.
E.U. Sends the UK A Letter of Formal Notice
The GBP traded with a heavy tone right from today’s opening. No one knew why at the start of the trading day, but it was quickly announced that the E.U. prepares a communique that marks the beginning of the formal infringement process against the U.K. on breaching of the Brexit Withdrawal Agreement.
The GBP pairs collapsed. All of them.
London Remains Optimistic About A Deal
However, an hour later, reports from London regarding the ongoing Brexit negotiations currency undergoing in Brussels showed an optimist tone. It appears that a landing zone on state aid has been agreed upon, and now only fishing remains as a sticky point.
Therefore, the GBP pairs quickly rebounded to the original breakout point. Any break in the opposite direction, considering that the end of the trading week nears, might be decisive for this week’s trading.
GBPCHF Technical Picture
The pair trades with a bullish tone while inside the congestion area. For the past four or five months, the 1.20 level acted as pivotal, with sellers stepping in on any move above, and buyers coming on any move below.
However, it feels as the price action builds energy to break above the horizontal resistance provided by the 1.20 level. On such a breakout, more continuation follows.
Bulls want to wait for 1.2050-75 to come. Next, they should place a stop-loss order at 1.1850 and use a risk-reward ratio of 1:2 or even bigger. The measured move belonging to the bullish flag provides more than enough space for such a ratio.
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GBPCHF Price Forecast
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