GBP/CHF has been trading in a free-fall mode from February 27th, when it exited to the downside the sideways range between 1.2430 and 1.2825, which had been in place since December 19th. At the time of writing, the rate looks to be heading towards the 1.2115 barrier, where a break may carry more bearish implications.
That said, after testing that barrier, which is marked as a support by the low of October 10th, the bears may decide to take a short break, thereby allowing a corrective bounce. Nevertheless, as long as the pair would be trading below the lower end of the aforementioned range, we would see decent chances for another leg down. The bears may decide to challenge again the 1.2115 area, and if they prove strong enough to overcome it, we may see them extending the slide towards the low of September 3rd, at around 1.1850.
Looking at our daily momentum studies, we see that the RSI lies below 30, and still points to the downside, while the MACD runs below both its zero and trigger lines, pointing south as well. Both indicators detect strong downside speed and corroborate our view for some further declines in this exchange rate.
On the upside, we would like to see a recovery back above 1.2530 before we abandon the bearish case. Such a move would signal the rate’s return within the pre-discussed range and may allow for some more recovery within that range. We could initially see a test of the 1.2620 level, marked by the low of February 24th, the break of which may allow extensions towards the peak of the following day, at around 1.2720. Another break, above 1.2720, could set the stage for the upper end of the range, near 1.2825.