Key Reversal Week in GBP/CHF Lures Bulls
21 October 2009
The FX Trader's view
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WEEKLY CHART: This year's medium term bull signal came at the break through falling resistance. This return line now offers support (runs through the 1.5700 area currently). However, last week saw a bullish Key Reversal Week which favours at least a s/term recovery now.
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DAILY CHART: After failure just ahead of the Fibo projection support has come after erosion of the 61.8% pullback level. Note how the lower 76.4% coincides with the 1.5842 Mar low (this has a bearing on that Fibo projection). The break of the 23.6% bounce level is encouraging and, with the Key Reversal Week in place, we view s/term dips to be temporary ahead of further strength. The 1.6873 38.2% level becomes next target, but key resistance lies higher at 1.7346/1.7379, 61.8% and 13-Jul low. Note that we can't say if this is a major turnaround yet.
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Buyers on dips will ideally favour a pullback towards the 61.8% retracement, so just around 1.6350/40 currently, with initial stops ideally just below 1.6100. A suggested target of 1.6850 for partial profits, then raising stops to cost. Further profit-taking would be wise ahead of that key 1.7346/79 resistance (no guarantees this can be reached, of course).
Note that a reverse situation obtains in EUR/GBP. Our Update of 9th Oct, with a bearish ‘warning', looks to have been appropriate if not spot on with its timing.
Philip Allwright
Mark Sturdy
Seven Days Ahead
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