GBPCHF Bites The Dust

Looking back across the moves we’ve seen in the markets this week and talking with traders across the spectrum it’s been interesting to hear about the different trades people have been involved in. focusing on the FX markets specifically it seems the biggest move that people are either celebrating or kicking themselves for missing, is the more than 3% sell-off in GBPCHF.

Now, if you trade the crosses, you’ll already know that they tend to see more volatility which can be a blessing and a curse and the move in GBPCHF this week is great example of this. So, as ever, if you caught the move congratulations! and if you didn’t? see you back in the markets next week! Let’s take a look at what happened.

What Caused the Move?

The bottom line is a classic case of weak currency versus strong currency. GBP has been on the backfoot this week, recording the biggest slide against the Dollar of the most out of the majors while the Swiss Franc has been the biggest winner.

Currency strength is a very simple, yet effective tool when it comes to making trading decisions and can help filter out the weaker trading ideas. For example, if you were considering buying GBPCHF this week but consulted a currency meter and saw that GBP was weakest and CHF was strongest, you might think about skipping the trade.

Vaccine Fears Weighing on GBP

Anyway, so what was behind these moves in GBP and CHF? Well, for GBP the main issue fuelling this downside is concern over the vaccination effort. Up to this point, the UK has been leaving its European rivals firmly in its dust as vaccination numbers have surged ahead with steady and increasing momentum.

However, that euphoria hit a wall this week as reports of delays and disruptions have raised fears over the program’s outlook, at a time when parts of Europe are experiencing a third wave of COVID and the UK is about to ease lockdown further, there are concerns that the UK will end up in a third wave also, causing lockdown easing to be halted or reversed.

Uncertainty Fueling Safe-Haven Demand for CHF

For the Franc? Well, the Swiss Franc as a traditional safe haven currency performs best in times of uncertainty. With European asset markets faltering and heading lower this week amidst growing third-wave fears, investors have been moving money out of EUR assets and into CHF.

So, there you have it, GBP lower and CHF higher – as simple as that. Let’s take a look at the technicals shall we.

Technical Views

GBPCHF

GBPCHF broke out above the bearish trend line and above the local 1.2987 highs this week, however you’ll note there was strong bearish divergence on this move, offering a warning that the move could fail. We then saw a bearish pin bar at the highs of the move, again signalling a potential reversal lower, before price then reversed and began collapsing lower, back beneath the 1.2987 and 1.2824 levels. While below here, the next downside level to watch is the 1.2534 region.

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