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Forex Elliott Wave Forex Market Analysis

Euphoric Market’s Sentiment Pushes GBPCHF Up

Overview

The GBPCHF cross began the current trading week, advancing over 1.30%, boosted by the U.S. post-election rally and Pfizer’s Covid vaccine upbeat results. However, the Elliott Wave view anticipates that the euphoric rally could soon end, and the cross could reverse its course toward new lows.

Market Sentiment

The week started with a risk-on U.S. Presidential post-election stock market rally, driving the risk-off currencies to drop. In this context, the GBPCHF cross advances over 1.30% to its highest level since late September.

The following 8-hour chart displays the intraday market sentiment. Although the sideways movement predominates since late September, the strong bullish move developed in the Monday trading session takes the GBPCHF cross to the extreme bullish sentiment zone.

Likewise, we can see the price action developing above the 60-period weighted moving average, which confirms the intraday upward bias that could hold during the following trading sessions.

On the other hand, the euphoric sentiment bolstered by news media’s coverage of the U.S. elections and the continuation of the stock market rally added to the news of the promising vaccine results developed by Pfizer and BioNTech leads us to expect a limited upside in the risk-on currencies.

Technical Overview

The big picture of the GBPCHF under the Elliott wave perspective reveals its progress in a descending broadening formation. Its latest downward sequence began on December 13th, 2019, when the price found fresh sellers at 1.33113. We can see, as well, that this leg still remains in progress.

The following daily chart unveils the advance in the fifth wave of Minute degree labeled in black, which started on 1.22224, where the price action declined in a bearish impulsive movement reaching a new lower low. This decline that ended on 1.15989 completed the first wave of Minuette degree labeled in blue.

Currently, the GBPCHF cross moves in its second wave (in blue). Nevertheless, the psychological barrier of 1.20 could represent a significative intraday resistance.

Technical Outlook

The intraday outlook of the GBPCHF cross reveals the bullish continuation of the current upward momentum. The next 2-hour chart exposes the supply and demand zones according to the potential next move that the cross could develop in the coming trading sessions.

On the one hand, the price advances in its wave c of Subminuette degree identified in green, developing the third internal wave. Likewise, the retracement that should correspond to its fourth internal wave could retrace to the area between 1.19292 and 1.19694. This zone could back the possibility of a new rally that would boost the price toward 1.21012 and 1.21306. 

On the other hand, our first scenario considers the bearish continuation. In this case, if the price action penetrates and closes below 1.1803, the cross could see further declines toward the zone of 1.1650.

Finally, our second scenario considers that if the GBPCHF cross continues its advance beyond 1.22224, the cross could extend its gains toward the descending upper- trendline shown in the daily chart.

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Forex Signals

GBPCHF Consolidates in a Triangle Pattern

Description

The GBPCHF cross in its 4-hour chart exposes an ascending sequence that began on June 29th when the price found a bottom at 1.16307. The consolidation formation as a triangle pattern could be indicative of more upsides in the following trading sessions.

The price action seems like an expanding formation, which leads us to foresee increasing volatility in the following trading sessions. At the same time, the current consolidation pattern as a triangle pattern that the GBPCHF cross develops since early August makes us expect the cross’s bullish continuation.

On the other hand, both the RSI and the MACD oscillator confirms the bullish bias that the GBPCHF cross maintains.

A bullish position will trigger if the price surpasses the 1.1990 level, with a potential profit target in the level 1.2090, which coincides with the last consolidation zone of June 10th. The bullish scenario will invalidate if the price breaks below 1.1920.

Chart

Trading Plan Summary

  • Entry Level: 1.1990
  • Protective Stop: 1.1920
  • Profit Target: 1.2090
  • Risk/Reward Ratio: 1.43
  • Position Size: 0.01 lot per $1,000 in trading account.

Check out the latest trading signals on the Forex Academy App for your mobile phone from the Android and iOS App Store.

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Forex Market Analysis

GBPCHF Could Start a New Bullish Cycle

The GBPCHF cross during this year underperforms over 7.3% YTD easing over 940 pips. Although the market action made it decline until lower levels since 2011, the cross could experience a recovery that could propel it toward fresh highs.

The Market Sentiment

The GBPCHF cross in its weekly chart illustrates the price moving below 50% of the 52-week high and low range, which reveals that market participants maintain its bearish bias for the cross. At the same time, we distinguish the 26-week moving average acting as dynamic resistance at 1.19298.

On the previous chart, we distinguish a bearish sequence that began in mid-November 2016 when the price topped at 1.5572 and looked ended on last March 19th, when the cross found support at 1.1113. Once the GBPCHF dropped until the lowest level since August 2011, the price bounced, finding a short-term resistance in the zone of 1.2212, which coincides with 50% of the 52-week high and low range.

During the previous two weeks until now, the market action moved it down, finding resistance at the 26-week moving average, which leads us to conclude that bear traders still maintains the market control.

Consequently, while the GBPCHF keeps moving below the 26-week moving average, the market sentiment bias continues being bearish.

The Elliott Wave Outlook

The GBPCHF cross under the long-term Elliott wave perspective exposes a broadening diagonal formation that began on April 17th, 2018, when the price found fresh sellers at 1.3855.

In the previous figure, we distinguish an expanding sequence that follows a 3-3-3-3-3 internal subdivision of Minuette degree identified in blue. This structural series could have its fifth wave of Minute degree (labeled in black) concluded on March 19th, when the price found support at 1.1113.

After the market participants took down the price to the lowest level of the year, the pair reacted mostly upward, developing a bounce in a five-wave sequence. This bullish movement may correspond to a wave (i) of the Minuette degree, which ended last June 05th, from where the GBPCHF cross started to develop an incomplete corrective corresponding to wave (ii) in blue, which remains in progress.

On the other hand, the RSI oscillator, which moves below the level-60, confirms the short-term bearish bias that GBPCHF maintains.

However, considering that the price action advances in an incomplete bearish wave (ii), our preferred near-term positioning remains neutral until the current bearish structure completion expects the potential rally corresponding to wave (iii), which could raise until 1.28 area.

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Forex Signals

GBPCHF Shows Bullish Signals

Description

The GBPCHF cross in its 4-hour chart exposes a bearish sequence that shows bullish reversion signals and could pop-up in the following trading sessions. 

The cross started its short-term downtrend on June 05th, when the price action topped at 1.2259 and confirmed the bearish bias of market participants on June 08th when the price action declined developing an engulfing formation. Once the cross bottomed at 1.1630 on June 29th, the price bounced until the previous highs zone reaching an intraday advance to 1.1712. The subsequent drop above the last lower low and the following bounce observed on the June 30th session, which reached a new higher high lead us to expect further upside.

The retrace toward 1.1714 could provide an opportunity to incorporate on the long side with a short-term target placed at 1.1837. This level coincides with the previous swing highs where the price should find resistance before to confirm a rally continuation.

On the other hand, the breakout over the descending trendline observed both the price chart and the RSI oscillator lead us to confirm the possibility of our bullish scenario.

The invalidation level of our trade setup locates at 1.1649.

Chart

Trading Plan Summary

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Forex Assets

What Should You Know Before Trading The GBP/CHF Currency Pair?

Introduction

GBPCHF is the abbreviation for the Great Britain pound and the Swiss franc. Since USD is not involved in this pair, it is called a minor currency pair. However, there is an excellent liquidity and volatility in this pair. In this pair, GBP is the base currency, and CHF is the quote currency. GBPCHF is often referred to as “pound Swiss franc.”

Understanding GBP/CHF

The value of GBPCHF determines the Swiss francs required to purchase one pound. It is quoted as 1 GBP per X CHF. For example, if the value of GBPCHF is 1.2740, then one needs to pay 1.2740 Swiss francs to buy a pound.

GBP/CHF Specification

Spread

Spread is the difference between the bid price and the ask price in the market. The bid price is the price used for shorting, and the bid price is the price used for buying a currency pair. These prices differ from broker to broker as well as the account type.

ECN: 0.8 | STP: 1.6

Fees

For every trade a trader takes, there is a fee associated with it. This fee is basically the commission charged by the broker. This fee varies from broker to broker. Note that there is no fee on STP accounts, and on ECN accounts, the fee is around 6 to10 pips.

Slippage

Slippage in trading is the difference between the price requested by the trader and the price given by the broker. Due to variation in volatility and the broker’s execution speed, it is not quite possible to get the exact intended price. Slippage happens only on market orders.

Trading Range in GBP/CHF

Knowing the number of pips the currency pair moved in a given timeframe is a good add-on to a trader’s analysis. This will help them get an idea of the profit/loss that can be made in a specified amount of time. For example, if the average pip movement on the 1D timeframe is 50 pips, then a trader can expect to gain or lose $517.5 (50 pips x 10.35 value per pip).

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can determine an extensive period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

GBP/CHF Cost as a Percent of the Trading Range

The cost as a percent of the trading range depicts the magnitude of the variation in the cost in different timeframes for different variable volatility. The percentages are useful in determining the ideal time to enter into this currency pair with marginal costs. Below are the tables representing the cost percentages for minimum, average, and maximum volatility.

ECN Model Account 

Spread = 0.8 | Slippage = 2 |Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 2 + 0.8 + 1 = 3.8

STP Model Account

Spread = 1.6 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.6 + 0 = 3.6

The Ideal way to trade the GBP/CHF

The lower the percentage, the lower are cost on the trade. In the table, we can infer that the costs are on the lower side in the max column. This implies that the cost of the trade is less when the volatility of the market is low and vice versa. Now, when it comes to the best time to trade this pair, it is ideal to pick at times when the volatility is decent, and the costs are affordable. For example, a 1D trader may trade during those times when the volatility is around 100 pips.

Moreover, the total cost of the trade can be reduced by entering and exiting trades using limit/pending orders. This way, the slippage on the trade will be fully cut off. The impact on the cost percentage when slippage is made 0 is shown below.

Total cost = Spread + trading fee + slippage = 0.8 +1 + 0 = 1.8

From the above table, it is evident that the costs have reduced by over 50% or so. Hence, it is preferable to trade using limit orders rather than market orders.

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Forex Market Analysis

Daily: Trade War Continues; Poor US Retail Sales Data; Sterling Hitting Highs Fueled by Carney’s Remarks

 


NEWS COMMENTARY


Trade war

Trade talk efforts between the U.S. and China cooled after U.S. President Donald Trump suggested that he was “under no pressure to make a deal with China, they are under pressure to make a deal with us”, Beijing was quick to shrug off the claim.

“The Trump administration should not be mistaken that China will surrender to the U.S. demands,” state run China Daily published on Friday.

“It has enough fuel to drive its economy even if a trade war is prolonged,” the paper insisted.

 

Retail sales data

Coming after Thursday’s weaker-than-expected inflation data, shopping takes the spotlight in economic indicators with numbers on retail sales and consumer sentiment arrived soft as well, as retail sales came 0.1% under expectations of 0.4%,  with core retail sales followed it to 0.3% less than forecast 0.5%. Increasing concerns that the Federal Reserve could ease its monetary policy.

 

 

Surging sterling

The pound hit a six-week high against the dollar on Friday as Bank of England governor Mark Carney reportedly warned that a no deal Brexit would likely mean higher interest rates.

Carney warned that if the UK and European Union were unable to forge trade deals that the result could be as bad as the 2008 financial crisis, driving the pound lower. The corresponding increase in inflation would likely require the BoE to tighten policy.

Oil

Oil prices recovered on Friday from the prior session’s sharp decline and remained on track for solid weekly gains as investors looked ahead to the latest gauge of U.S. production.

Both barrels were still on track for weekly gains of 1.8% and 2.0%, respectively, as traders await the latest data on U.S. crude production from Baker Hughes.

The U.S. rig count, an early indicator of future output, rose by 2 to 862 last week, hovering near its highest levels since March 2015.

 

 


CHART ANALYSIS


 

 

DAX

On the daily chart, we can see that the price had a bearish rally for the past six weeks until it reached the key support zone of 11900.8-11742.4

It’s also the lower side of the descending channel along with 88.6% Fibonacci

The price is technically expected to have its way up back again to the key resistance level 12582.46 which is the top of descending channel and the broken ascending trend



OIL

On the daily chart, the price is moving sideways between the support area 66.2-64.15 and the resistance area 74.45-72.45

After breaking the ascending trend, the price turned back to this support zone with bounce from an ascending trend as shown

The price now is retesting this zone with price action “pin bar”, to have a bullish movement again

So, it’s expected to go up to the resistance zone of 72.45-74.45


EUR/CHF

On the daily chart, the price is facing a punch of support levels that would it hike again due to:

firstly the key support zone 1.127-1.119, secondly the reversal pattern “wedge”, third the AB=CD harmonic pattern, and finally the divergence on RSI

the price is supposed to meet its first target at 1.1435


 

GBP/CHF

On the daily chart, the price had bounced from the key support level at 1.247 with engulfing price action, to reach the dash resistance level at 1.271 to retrace from it to 1.2595

the price is about to shape the second shoulder of the H&S reversal pattern, it will be assured if the price breaks through 1.271

followed by divergence on RSI, the price is expected to reach the resistance level 1.285 where to meet the upper edge of the descending channel



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Forex Market Analysis

Forex and Indices – Daily Update – 24.07.18


Fundamental Overview


Mixed data of preliminary PMI in the Eurozone.

The Flash Purchase Managers Index (PMI) data in July show signs that this third quarter for the eurozone has begun to lose the buoyant momentum that registered during the first half of the year. Manufacturing PMI modestly reached 55.1 points, slightly higher than the 54.9 points reached in June. In the opposite side, Services PMI index fell to 54.4 points from the 55.2 points reported in June. The slowdown in growth momentum suggests that similar levels could be seen in August.


source: tradingeconomics.com

The main cause of this deceleration could be attributed to the fuels price increase of oil as well as the increase in tariffs on steel and aluminium.


source: tradingeconomics.com


Forex and Indices Technical Analysis


EURUSD

The EURUSD in 30-minutes chart continues consolidating. The price is moving above the weekly pivot suggesting a bullish pressure for the pair. Long positions should be considered if the price breaks above 1.1710, with a potential profit target placed at 1.1775. Short positions should be valued if the pair breaks down 1.1667 with a profit target at 1.1615


GBPUSD

The GBPUSD in the 30-minutes chart is consolidating the Friday 20th rally. For long positions, the price must break above 1.3137 with a potential profit target at 1.3208. Short positions should be considered if the price breaks under 1.3085 with a potential target at 1.3022.


USDCHF

The pair USDCHF in the 30-minutes chart is developing a bullish retrace of the previous sell-off. For bullish positions, the next resistance is 0.996; for bearish continuation, the critical support to break down is 0.9922, and the potential profit target is at 0.9887.


EURCHF

The EURCHF cross in the 30-minutes chart is testing resistance with the 200-period moving average which is converging with the first daily resistance. For long positions, we need to see the breakout of the 1.1629 level with a potential target at 1.165 (Weekly Pivot Zone). In the bearish side, the price should break under 1.1603 level, with a potential profit target at 1.1582.


GBPCHF

The GBPCHF cross is turning bullish after the 1.3049 level breakout. Long positions have the potential target at 1.3117, coinciding with the third daily resistance. On the short side, the price should break down 1.3001 level, with a potential target at 1.2965 level.


FTSE 100

FTSE 100 in the 30-minutes chart shows that the price is moving above 24 and 200 moving average. Also, the British index has bounced from the weekly pivot level, the next resistance es at 7,728. For bullish continuation, the next target is 7,786 pts, which is the convergence between the second weekly resistance level and the third daily resistance.


DAX 30

DAX 30 in the 30 minutes chart shows that the price has surpassed the third daily resistance without to make a reversal move to the daily pivot level, it suggests that the German index should continue with the bullish bias with a target placed at 12,855 pts (previous resistances confluence area.)


Check out Forex and Indices technical analysis for July 16, 2018.

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Forex Market Analysis

U.S. Inflation Grows Firmly In June – Forex and Daily Update – 12.07.18


Fundamental Overview


U.S. inflation grows firmly in June.

Forex Trading Signals: The Consumer Price Index (YoY) in the United States in June reached the highest level in 6 years, climbing to 2.9% from the 2.8% reported in May. According to what was stated by the U.S. Bureau of Labor Statistics, the CPI in June increased driven by the food index, which advanced 0.2 per cent; and the gasoline index, which grew by 0.5 per cent. Despite this increase, the energy index decreased 0.3 per cent, mainly due to the Energy Services index, which fell 1.5 per cent in June.

Forex trading signals Source: Forex Trading Signals – Forex.Academy Collection


Technical Overview


EURUSD

The EURUSD 2-hour chart is showing bullish signals due to the price making higher highs and higher lows. Currently, the common currency is making a retrace to the green box, from where we expect new upsides to the 1.19067 area, completing a major degree connector. Invalidation level is 1.15080.


 

GBPUSD

The GBPUSD 2-hour chart is making a new bearish leg after the upward sequence in 5 moves started on June 28th. We expect a continuation of the previous bullish cycle from the zone between 1.3181 to 1.3099 with a target placed on 1.3475 area from where the pound should decide the next moves. Invalidation level of the bullish cycle is at 1.30494.


 

USDCHF

The USDCHF 2-hour chart is making a breakout of the consolidation range which is developing from the first half of June. The RSI oscillator shows that price has a bullish bias. In the short-term, we expect a limited retrace to incorporate to the bullish long-term trend. The invalidation area is 0.98579.


 

EURCHF

The EURCHF cross in the 2-hour chart is moving bullish after the breakout above 1.1565 level. We expect more upsides which could drive the cross to the targets at 1.1768 in the short-term, and 1.19475 in the long-term. Invalidation level is 1.14799.


 

GBPCHF

The GBPCHF cross has broken up the psychological 1.32 resistance. We expect a retrace to the area between 1.319 until 1.31057, from where the price should continue rising to 1.3312 level in the short-term and the 1.3442 level in the mid-term. Invalidation level is 1.3023.


 

FTSE 100

FTSE 100 in the 2-hour chart continues moving sideways in a complex corrective structure, but the main trend is bullish. We expect a limited upside to 7,792 level, from where we should wait for a new connector completion. Invalidation level is 7,508.


 

DAX 30

The DAX 30 is bouncing from the Potential Buy Zone (green box), from where we expect an upward movement to the area between 12,695 to 12,742. If DAX climbs above 12,807 pts, the German index could reach and test the 13,020 level resistance. Invalidation level is 12,104.


 

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Forex Market Analysis

Forex and Indices – Daily Update – 29.06.18


Fundamental Overview


“Green sprout” in New Zealand?

Forex Market Update: The increase in building consents in New Zealand which reached 3,407 permits in May, the highest level reached since June 2004, represents 7.1% after the fall of 3.6% registered in April. Will this be a green outbreak of improvement in New Zealand’s macroeconomic conditions or will it be only an isolated effect?

 

Forex Market UpdateSource: Forex.Academy Collection – Forex Market Update

 


Technical Analysis


EURUSD

The pair is moving in a bearish wedge pattern which could drive to the price to a new lower low ending the bearish cycle near to the 1.145 zone coinciding with the lower trendline of the bearish wedge. Invalidation level of the downward cycle is at 1.18523.



 

GBPUSD

GBPUSD is moving in a bearish wedge in the same way as the EURUSD. We expect a spike to the PRZ before it makes a reversal move, maybe in the next week. A key level to watch out for is 1.30 as a psychological level. Invalidation level of the bearish cycle is at 1.34725.



 

USDCHF

The Swiss currency is moving in a triangulation structure which represents a continuation of the previous bullish move. However, as an inverse correlation with EURUSD, the movement could be a false breakout as a bull trap. In this pair, we will maintain in a neutral position before taking a position in the market.



 

EURCHF

The EURCHF cross is turning bullish after the breakout above the 1.1565 level, a throwback to this level could drive the cross to the 1.1772 short-term targets. RSI is supporting this scenario with the upward trendline.



 

GBPCHF

The GBPCHF 2-hour chart shows the importance of the invalidation level of a proposed scenario and its ex-post analysis. In this cross, we expected a limited retrace to the area between 1.3124 and 1.3089 for an upward move, with the profit target in the area between 1.3323 and 1.3374. However, after the retrace to the blue box, the GBPCHF cross continued falling. Watching the AO oscillator between May 18th and June 1st, we can appreciate that the bearish move corresponds to a bearish wave 3, then the retrace analysed is a wave 4. In consequence, the final movement as a bearish wedge pattern, which should end the bearish cycle.


FTSE 100

The FTSE 100 is moving sideways with a bearish bias which is correcting the previous rally realised from March to May. Despite the bearish bias of global indices, we prefer to avoid the short positions expecting the timing for entry in the bullish side.




DAX 30

In the Thursday 28th trading session, DAX 30 fell to the control level finding support to the corrective move. Now we expect consolidation on the 12,100 pts from where the German Index could start a new bullish cycle.



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Forex Market Analysis

Forex and Indices – Daily Update – Two Summits One Weekend


Forex Fundamental Analysis Signals


 

In this session, markets are moving expectant at the G7 summit news, mainly due to the tone between President Trump and the rest of the leaders of the seven wealthiest economies of the world. The expectation occurs in the context of the tariffs imposed by the Trump Administration as part of the “America First” agenda to the steel and aluminium imports from Canada, European Union, and Mexico. The United States and European Union have established a dialogue for this Friday, said a French official. President Macron is confident in the advancement of trade issues that have split the United States and its trade allies.

Another summit that markets are following is the meeting of the Shanghai Co operation Organization (SCO). The meeting will begin this Saturday and will include with China, Russia, India, Pakistan and other four nations from Central Asia.  The importance of this meeting lies in the fact that while G7 leaders are discussing the new protectionism, the Chinese President Xi Jinping and the Indian Prime Minister Narendra Modi will talk about an “open and inclusive world economy.”

 


Technical Analysis


DAX 30

The DAX 30 opened the session with a bearish gap. Still, the index is in a corrective structure. This is normal after the rally that started developing on March 26th when DAX found support at 11,726.6 up to May 22nd when it reached the 13,204.3 points. Our vision for DAX is that price could make a new lower low at 12,528.9 pts.



FTSE 100

The FTSE 100 maintained the same consolidation structure from the past week. In the same way as the DAX 30, the FTSE is consolidating after the rally showed since March 26th when it touched the 6,866.9 level and then made an extended wave soaring to 7,903.5  in May 22nd. We foresee a new lower low at 7,468.3 points.



EURUSD

The common currency is developing a retracement from the 1.1840 level; the highest level reached in four weeks. We expect the pair will make a new higher low to the area between the levels 1.1724 to 1.1667, as an A-B-C structure. From this zone, we should see new higher highs to the 1.19 area.



GBPUSD

The pound is making a corrective move shaping an A-B-C pattern, which should dip to the area between 1.33423 and 1.32880. From this area, the pair GBPUSD should continue the bullish cycle started on May 29th, when the price touched the 1.32045 support. The mid-term target is at 1.35940. Invalidation level for this sequence is 1.32544.



USDCHF

The Swiss currency is making a bearish move from the highest level reached on May 7th, when it touched the 1.00563 level. From this area, the pair started to dip in five waves, finding support at 0.97883 on June 7th. From this level, the USDCHF pair bounced above the last corrective structure touching the 0.98877 price. If 0.97883 represents the short-term bottom, we expect a new lower move to the area between 0.98313 and 0.98092, from where the USDCHF could begin to see new higher highs.



GBPJPY

The cross is making a corrective pattern as a flag structure, if the price reaches the zone between 146.234 and 145.719, we foresee a new rally which should carry the price to new highs between 148.908 to 149.645 area.



GBPCHF

GBPCHF is building an expanding ascending triangle. Our main scenario is a new low to the area between 1.31242 and 1.30806, from this area we expect a new higher target in the zone between 1.33236 and 1.33745. Invalidation level is 1.30581.