A surprisingly slower U.K. inflation just dragged the British pound lower across the board!
Will it mean an extended downtrend for GBP/CHF?
Here’s what we’re looking at in the 1-hour time frame!
GBP/CHF 1-Hour Forex Charts by TV
In case you missed it, the U.K. just dropped its August inflation figures. The headline CPI slowed down from 6.8% to 6.7% when analysts saw the number accelerating to 7.0%. Even the core figure clocked in at 6.2%, much slower than the dip from 6.9% to 6.8% that market players are expecting.
The not-so-hot consumer price increases give the Bank of England (BOE) one more reason to keep its interest rates steady or at least facilitate a “dovish hike” tomorrow.
Meanwhile, the Swiss National Bank (SNB) is expected to raise its interest rates a few hours before the BOE does. This may attract buyers especially those who are looking for “safe haven” options in the European region.
GBP/CHF, which has been making lower highs and lower lows since mid-August, may extend its downtrend and make new September lows. It may even revisit its 1.0600 July lows if there’s enough momentum!
Traders who want to take advantage of GBP/CHF’s downswing can watch out for a clear breakout below the S1 (1.1080) Pivot Point support line. A couple of breakout candlesticks followed by momentum could yield decent pips before we see enough profit-taking and/or buying pressure.
If you think that we’ll see some pullback like in the July CPI release, then you can also target higher entry areas for the downtrend. The Pivot Point (1.1130) line is right above the 100 and 200 SMAs while the R1 (1.1160) area was also a major area of interest.
Keep in mind that we could see increased volatility among the major currencies during the FOMC event today and that a pullback may still be on the table.
What do you think? Will GBP/CHF see a legit retracement in the next trading sessions? Or will GBP/CHF extend its downtrend without looking back?