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GBP/CHF Technicals – Overbought Signals at Resistance Area

Daily \ Fan Yang \ 2:15 PM EDT \ December 7th, 2011

Forex Technical Update

Previous: GBP/CHF – Range Pivots and Scenarios (12/2)

GBP/CHF

The 4H GBP/CHF chart shows a bullish market that has turned sideways, but is still trading about the 200 period moving average. There has been a rally since the market tagged the 200SMA treating it as support. The rally has brought the market to the 1.4540 -1.4550 area, which has been resistance in early November. On top of that the 4H RSI which is near overbought levels, has bearish divergence with the price. Also note the recent 4H candle that ended up being a doji with a long tail to the upside reflecting indecision and rejection of bullish attempt as we hit this resistance area.

Now turning to the 1H chart, we see that the market is trading near the upper Bollinger Band (3 standard deviations from 200SMA). This along with the fact RSI was above 70 spells an overbought market, and note that there is a bearish divergence here as well. There has already been some decline from the 1.4540 resistance. In the short-term, the 1.44 level is an important support, which the market respected during 12/6. A break below 1.44 and the 200SMA in 1H chart opens up the 1.4280 low, near the 200SMA in the 4H chart. Below that 1.4250 is the range support.

As we gear up for the Bank of England meeting 12/8 7:00AM EST (12:00GMT), the resistance factor should be significant, and we can see the market reverting back to the middle of the range near 1.44, maybe just below it.

Fan Yang CMT is the Chief Technical Strategist FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

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