In today's technical analysis, let's examine the British Pound to Swiss Franc (GBP/CHF) pair, which is showing a significant reversal. This shift is largely due to the Swiss National Bank's surprising interest rate cut last week, prompting traders to readjust their positions on the Swiss franc. After weeks of strengthening, the Swiss franc is now weakening.
On the GBP/CHF chart, the pair is respecting technical analysis patterns remarkably well. We witnessed a drop followed by a flag pattern marked with green lines, which also resulted in a drop, showcasing a very technical movement. Currently, the price is forming an inverse head and shoulders pattern, with the left shoulder and head already in place, and the right shoulder nearing completion.
To trade this setup, the orange neckline is the key level to watch. A breakout above the orange resistance and a daily close above it would signal a long-term buy opportunity. Conversely, if the price bounces off the orange resistance, it might not provide a strong sell signal due to underlying fundamentals, but it would extend the bearish sentiment. However, given the current dynamics, the price is likely to continue climbing higher.