Decisive breakout of Head and Shoulders Bottom and also breakout above the 200-day exponential moving average (ema) occurred four weeks ago. (Note: Pattern is not perfect with right shoulder noticeably lower than left. But valid nonetheless given reaction of price following breakout above neckline and 200-day ema.)

Subsequently, the GBP/CHF continues higher following breakout and last week breaks out above the long-term downtrend line and closes above it on a daily basis. Even though the pair has closed back below the trend line the move above the line indicates this pair probably wants to go higher.
21-day ema crosses above 200-day ema two weeks ago
During minor retracements price was rejected around 21-day ema support several times over the past six weeks and it held. This makes the 21-day ema a moving average to watch for support again in the future.
The 200-day ema was tested once as support during recent pullback and it held. Support may be seen again around the 200-day ema during pull backs.

Given the above the odds favor an eventual continuation of the uptrend that began off the mid-March 1.2215 bottom. In the short-term this pair is overbought and starting to pull back. However, support of 21-day ema is close by at 1.2814. The probability that we’ll see signs of support around the 21-day ema is higher than normal given that the uptrend line represents the same price support area. On the below chart the uptrend line is covering the 21-day ema.

Regardless, if price continues lower the 200-day ema should halt further declines. The 200-day ema is now at 1.2748.

Watch price behavior around the 21-day ema for signs of reversal on the intraday charts. If the 21-day fails to hold the decent then next watch for support around the 200-day ema.

Upside potential is there given that the target from the Head and Shoulders Pattern is around 1.3865. This is a long-term target and it could take some time to meet this objective if it is to be reached.

In the meantime, lower down, the next main target area is around a price zone from approximately 1.3416 to 1.3582. That resistance zone provides plenty of upside as it’s over 500 pips above last week’s close of 1.2895. (www.marketstoday.net)

Bruce Powers, CMT
Chief Technical Analyst
http://www.marketstoday.net/

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.