Pound-Swiss Franc X-Rate Reaches Upside Target Increasing Chance of a Pull-Back

- GBP/CHF is pausing after breaking above a major trendline

- Could be subject to a short-term pull-back before more gains

- Strong bullish momentum supports a new uptrend medium-term

The Pound-Franc exchange rate has broken above a major trendline and has managed to follow-through to a the targets we established in our previous analysis; first at 1.2950 and secondly at 1.3010.

Now the pair has met its upside targets it could take a pause before continuing higher; we are actually seeing signs of a pullback at the start of the new week with the exchange rate retracing back 1.2972 at the time of publication.

Momentum, as measured by the RSI indicator, in the bottom panel, is giving a reading of 65, which is close to the overbought zone at 70 and suggests increasing risks the pair may be topping.

The short-term uptrend is intact and expected to extend eventually. The pair put in a classic bottom at the September lows further adding to evidence the pair is changing trend.

Due to the increasing risks of a pull-back in the week ahead, we adopt a neutral stance in the short-term, although medium-term we remain bullish.

The weekly chart below shows how complex the longer-term picture is for the pair.

The pair was in a downtrend between 2015 and 2017. There then followed a period in which the exchange rate recovered to 1.38 in April this year, and after that, it declined to the September lows at 1.24.

Since then it has recovered, broken above the trendline and moved back up to 1.30 as shown on the daily chart.

The overall long-term trend is mixed, possibly even marginally bearish.

The one strong piece of bullish evidence on the weekly chart is the sharply rising RSI indicator in the bottom pane, which is now at a similar height to where it was in early May when the exchange rate was at 1.35.

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