An extension to the Brexit transition period is now considered, due to the global Covid-19 pandemic. The UK has until June 30th to make a formal request for a two-year extension. Such a move will force the UK to accept EU rules, which was ruled out by the Johnson government. The current transition period ends on December 31st, and the UK previously noted preparations for a WTO-type trading environment commence if no progress is made by June. Given the global disruptions caused by the virus, a limited extension cannot be ruled out, but it may be far less than two years. It may merely cover the lost time forced by Covid-19. The GBP/CHF is expected to use its ascending 38.2 Fibonacci Retracement Fan Support Level to accelerate farther to the upside.
The Force Index, a next-generation technical indicator, retreated from its peak but was able to bounce off of its horizontal support level. Bullish pressures are enhanced by the ascending support level, while the descending resistance level serves as temporary support, as marked by the green rectangle. The Force Index is favored to push higher, leading the GBP/CHF to a new multi-month high. Bulls remain in control of price action with this technical indicator in positive territory.
This currency pair entered a sideways drift after completing a breakout above its short-term resistance zone, converting it into support. This zone is located between 1.17124 and 1.18267, as identified by the grey rectangle. On April 5th, Elizabeth II, the Queen of the United Kingdom, and the other Commonwealth realms made a rare televised address to thank NHS staff, and stress the importance of self-isolation, unity, and resolute. Her Majesty’s involvement to inspire the nation indicates more significant challenges ahead. The UK is in a superior position to overcome economic disruptions, granting the GBP/CHF a bullish fundamental catalyst. You can learn more about a resistance zone here.
One essential level to monitor is the intra-day high of 1.20862, the current peak of the advance and end-point of the redrawn Fibonacci Retracement Fan sequence. A sustained breakout will take the GBP/CHF into its resistance zone located between 1.22443 and 1.23360, as marked by the red rectangle. Bullish momentum is anticipated to suffice to elevate price action into its next resistance zone, which awaits between 1.25316 and 1.25883. Volatility is likely to increase with the release of March economic data.
GBP/CHF Technical Trading Set-Up - Breakout Extension Scenario
- Long Entry @ 1.20300
- Take Profit @ 1.25800
- Stop Loss @ 1.19000
- Upside Potential: 550 pips
- Downside Risk: 130 pips
- Risk/Reward Ratio: 4.23
Should the Force Index correct below its ascending support level, the GBP/CHF is set to face short-term selling pressure. While Switzerland is leading efforts to support small and medium-sized businesses, trumping most dominant economies in this category, the UK has a more substantial stimulus in place. The downside potential remains limited to its 61.8 Fibonacci Retracement Fan Support Level, and Forex traders are recommended to take advantage of such a move with new buy orders.
GBP/CHF Technical Trading Set-Up - Limited Correction Scenario
- Short Entry @ 1.18200
- Take Profit @ 1.16400
- Stop Loss @ 1.19000
- Downside Potential: 180 pips
- Upside Risk: 80 pips
- Risk/Reward Ratio: 2.25