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Chart Of The Day: GBP/CHF Looks Set For A Big Breakout 

By Fawad RazaqzadaForexJan 22, 2021 11:54
uk.investing.com/analysis/chart-of-the-day-gbpchf-looks-set-for-a-big-breakout-200452995
Chart Of The Day: GBP/CHF Looks Set For A Big Breakout 
By Fawad Razaqzada   |  Jan 22, 2021 11:54
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This article was written exclusively for Investing.com

It is very difficult to be bullish on the pound during times like now, with COVID deaths hitting new records every day and the economy being on the brink amid ongoing lockdowns. Indeed, the pound sold off this morning on renewed concerns about a full UK border closure, which was being 'considered' by the government, according to Environment Secretary, George Eustice. This is due to concerns about new COVID variants being imported from abroad. 

However, despite today’s weakness, I am quite bullish on the pound. 

A no-deal Brexit has been avoided and with the UK being ahead of many countries in rolling out the COVID vaccines, the economy could re-open quicker and growth could rebound as confidence slowly returns. This might not happen until at least the start of Q2, but as markets are forward-looking, the latest dip in the pound could be bought. 

Among the pound crosses, the GBP/CHF is the one that I think might do well in the weeks and months ahead because demand for the haven Swiss franc is likely to drop as confidence returns. What’s more, the Swiss National Bank is always ready to step in and devalue the franc, with the currency becoming uncomfortably strong during this pandemic. 

So, GBP/CHF was clearly not looking exactly bullish at the time of writing, but due to the above reasons it is one to watch in the days and weeks ahead. I reckon it could be poised for a big breakout soon; we just have to wait for the bullish trigger. 

The longer-term picture is starting to show a few promising signs with the weekly chart forming higher highs and higher lows:

GBP/CHF Weekly
GBP/CHF Weekly

On the daily time frame, you can see that I have marked out today’s high at 1.2160 as the trigger level that might lead to the breakout:

GBP/CHF Daily
GBP/CHF Daily

The reason I have chosen this level is because on the day before, GBP/CHF had formed a bearish-looking inverted hammer-like candle and there was some downside follow-through when the low of that candle broke today. Thus, if in the coming trading days, GBP/CHF goes back above the low of Thursday’s range and goes on to take out today’s high, this would clearly tell us that the sellers are trapped. As a result, price may then stage a short-covering rally that could take rates above the key resistance in the 1.2200 area, leading to further technical buying. 

So, a move above 1.2160 is one of the ways to potentially get on board on the long side. Another way is to wait for the formation of bullish price action on the lower time frames, ideally above the 1.2000-1.2050 key support range. 

Chart Of The Day: GBP/CHF Looks Set For A Big Breakout 
 

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Chart Of The Day: GBP/CHF Looks Set For A Big Breakout 

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Comments (5)
maxamud maxamed ciise
maxamud maxamed ciise Jan 25, 2021 16:30
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Hoay Mei
Hoay Mei Jan 22, 2021 17:46
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Great analysis
Darren Mason
Darren Mason Jan 22, 2021 12:07
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Fawad, many thanks for your views on this cross! I too have been looking for NG at this cross and I truly believe that the points mentioned will more likely play out as you have stated. Also worth mentioning is that the weekly & monthly MACDs are very constructive for this cross to begin it's climb...
Craney Carlsson
Craney Carlsson Jan 22, 2021 12:04
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fck
Stephan Caccamo
Stephan Caccamo Jan 22, 2021 12:01
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Great article, thank you
 
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Disclaimer: Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
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