British Pound has been receiving a lot of coverage in my blog. One of the crosses that I’ve been trading a lot is GBP-CHF. Every now and then I take a longer term view of this pair. If anybody recalls, that’s how 2009 was started here, with a weekly chart analysis of Pound-Franc. For those who don’t remember or, more likely, have not read it, the post was “The big picture“, where I went over weekly chart of this pair. New all time low was just established and I started to look for long trades. General prediction, at the time, was that the price would pull back to 1.7400 area. Pretty much this is what happened, bringing few good trades over last 6-7 weeks. Combined with one of the comments yesterday, right now could be a good time to take a closer look at this cross again.

Since the original post was published, price made its way back to just above 1.7400 level. Notice how previous support in this are has become resistance now. This role reversal is called a “polarity effect” or “polarity principle” and it happens very often on all time frames. What I find interesting here, is that the price also met 100SMA at exactly the same area. Those of you who bother reading my posts know that I see 100SMA as support/resistance in certain situations. So far price bounced from all time low but the major down trends is NOT reversed yet. For that it has get above 100SMA and, to be even more convincing, take out previous high. On this chart this is at about 1.8650, still far away. Nonetheless, I keep trading only on the long side, waiting out periods of down swings. From my perspective, daily chart doesn’t provide good buy opportunity at the moment. To take a trade here, I’d like to see price get above 1.7450 or so.

Intermediate term chart, 4H, is rather difficult to interpret, with couple of large swings both ways, but the price is getting progressively higher over time, so it has bullish undertone. One could get long here, but frankly, the best attribute would be small stop/loss, shown by red lines. All these levels would be correct to use, depending on one’s risk tolerance. Couple of trades could be planned here, if somebody is strongly bullish.
First would a buy at the open on Sunday with objective at about 1.7000, and if this is broken next trade just above, with 1.7400 target. Myself. I will NOT be taking trades using this chart. Price behaviour is rather erratic and sending mixed signals. Last few candles suggested strong reversal to downside, followed immediately by very bullish hammer. Seems that price is making new highs, only to go through deep pullbacks. This is an ugly chart and I will leave it alone, even though, within bigger picture, it provides decent trades opportunities. Just not the kind I like.

Now, this hourly chart is where I will look for long trades. It would be very tempting to simply buy at the open, but it is better to wait for farther price development. Friday brought large price swings, so it is possible that gap will be present once market opens. Would be nice to see a little zig-zag action and then have a move above 1.6700. So, this is a plan, to go long somewhere between 1.6700 and 1.6750, Sunday night or Monday morning. Depends on how market behaves. On a side note, if somebody is bearish GBP-CHF, this chart provides decent shorting set up under 1.6540. I’m not interested, though, only long trades for now.

Mike K.