Pound / Swiss Franc Forecast: Still Locked in Holding Pattern at Level of the Trendline

Image © kasto, Adobe Stock

- Exchange rate meets major trendline and stalls

- H&S pattern on weekly chart threatens downside

The Pound-to-Franc exchange rate is trading at 1.3167 at the time of writing, barely changed from the start of the week.

After rising up fairly rapidly at the start of 2019, the pair has found resistance at a major, multi-year, downsloping trendline, has stalled and entered a range-bound consolidation phase between about 1.28 -1.34.

The most recent rally attempt during April stalled after touching resistance from the 200-week moving average (MA) at 1.3274.

A clear break above the March highs at 1.3423 could provide confirmation of a continuation up to a target at 1.3600 or higher, although this probably wouldn't happen inside of 1-3 months.

Alternatively, a break below the 1.2854 lows would signal a downside breakout and a much more bearish outlook for the pair with a downside target at 1.2550, which could happen within 2-4 weeks.

The price action on the daily chart shows the formation of a possible head and shoulders (H&S) topping pattern. This is composed of three peaks, the central one of which is the tallest (the head), and the two either side shorter, but of a similar height (the shoulders). Incidentally, Tuesday’s exhaustion spike peak and Japanese gravestone doji could be a sign the right shoulder of the H&S is completing.

It is not absolutely certain this is a bona fide H&S. Normally the more reliable ones happen at the top of longer-term uptrends, but even so, if it is, and the pair breaks below the sloping neckline at 1.30, and more importantly also the key February lows at 1.2860, it could signal a slide down to a target at 1.2550, probably over the next 1-4 week timeframe.

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