GBP/CHF just broke below an established support!
Will this lead to a break-and-retest opportunity for breakout traders?
Check out the breakout on the 4-hour chart:
In case you missed it, a wave of risk aversion in the U.S. markets finally dragged GBP/CHF below the 1.2100 area.
GBP/CHF hasn’t gone sub-1.2100 since December 2021!
The pair has since found support at the 1.2000 psychological level and may even retest the 1.2100 broken support. After all, 1.2100 is also right around the 50% Fibonacci retracement of the last downswing.
Can GBP bulls bring GBP/CHF back up above 1.2100? Or are we looking at a legit downside breakout?
The fundamentals aren’t looking good for GBP bulls.
For one thing, the U.K.’s Office of Gas and Electricity Markets (Ofgem) just announced that it would raise the energy price cap – which limits how much providers can raise prices – from £1,971 to £2,800 a year.
This means that a typical U.K. household bill could rise by as much as £800 per year and likely put as many as 40% of the population in “fuel poverty” Yikes!
It also doesn’t help that traders are back to worrying about global growth slowdown. Lower PMI reports and new home sales from the U.S. yesterday underscored the risks of high inflation and high interest rates on economic recovery.
A small bullish divergence on the 4-hour time frame and a bit of buying after hitting the 1.2000 support could push GBP/CHF to the 1.2100 area that we’re eyeing.
Keep close tabs on how the pair reacts to the level, as it could dictate where GBP/CHF goes next.
If 1.2100 holds as resistance, then GBP/CHF could make new monthly lows this week.
But if the bulls manage to keep the pair above 1.2100, then GBP could get enough momentum to reach 1.2200 or even the 1.2250 levels closer to the 100 and 200 SMAs.
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