As illustrated in the chart above, there is a clear bullish head and shoulder formation. Prices are currently testing a key resistance level at around 1.18400 , a break and close above this zone would confirm the bullish head and shoulder pattern with upside potential.
However if prices fail to break and close above the 1.18400 level, there is a possibility we may see prices rejecting from this resistance and heading lower, thus invalidating the head and shoulders pattern. Therefore is essential to wait for a bullish 4-hr/daily close above the resistance zone, with entries being at the break and retest of the zone.
It appears markets are remaining very much on the risk-on side, resulting in risk FX such as GBP catching an attractive bid to the upside. Investors are focusing on economic recovery against covid-19 second wave risks, keeping risk appetite somewhat higher.
In the weeks to come, macroeconomic data should be relatively positive given the increased economic activity we are seeing globally, this will provide additional confluences to support a greater risk appetite and hence could see GBP push higher with less demand for safe havens such as the CHF.
Potential Entry: At/If prices break , retest and reject from the key 1.18400 area
Potential Stops: At around 1.17640
This trade carries a risk to reward ratio of around 1.74, with a maximum profit potential profit of +170 pips and a maximum potential loss of -100 pips. We strongly advise you place stop losses at entry once a trade is at least 15 pips in profit