The GBPCHF has corrected sharply after approaching its descending 200 DMA as visible in this H4 chart. This currency pair has now corrected and formed a double bottom. We expect the GBPCHF to stabilize around current levels and launch a rally which will lead to a breakout above its 50 DMA and potentially into its descending 200 DMA.
MACD has improved during this correction and has formed a higher low which is a bullish signal. We also expect MACD to inch closer to its centerline during the move higher with a potential bullish crossover. RSI has broken down into extreme oversold territory and a breakout back into oversold territory should fuel the rally.
We recommend a long position at 1.4200 with a potential second entry level at 1.4050. We also recommend a stop sell order at 1.4100 in order to hedge the initial long position and before adding new long positions to this trade.
Traders who wish to exit this trade at a loss are advised to place their stop loss order at 1.4100. We will not use a stop loss order and execute this trade as recommended. Place your take profit target at 1.4400.
Here are the reasons why we call the GBPCHF currency pair higher
- The GBPCHF has corrected sharply after approaching its descending 200 DMA and now formed a double bottom
- MACD has formed a higher low during the correction and we expect it to approach its centerline during the move higher
- RSI is now trading in extreme oversold territory and a breakout into oversold territory should add to the rally
- Profit taking which will cause a short covering rally in order to realize profits
- New institutional long positions by swing traders off of good support levels and a bullish chart formation
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