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Key Reversal Week in GBP/CHF Lures Bulls

21 October 2009

The FX Trader's view



 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.




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.




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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