Forex Analysis – Trade of the Day: GBP/CHF 21st October 2014

Switzerland – Trade Balance

At GMT 6:00 a.m., the Swiss Federal Statistical Office released the national trade balance figure, which measures the difference of the value between net import and net export of the country during the previous month.

Since the export of a country is directly correlated to the demand for its currency, a positive trade balance figure indicates that foreigners had to buy more local (Swiss) currency in exchange of their domestic currency. Hence, economists and market participants consider the trade balance to be an important indicator of the health of the economy.

Last month, the Swiss trade balance figure came out at $1.33 billion, and this month the forecast was set at $2.43 billion. However, the actual trade balance figure came out better than expected at $2.45 billion.

United Kingdom – Public Sector Borrowing

At GMT 8:30 a.m., the UK’s Office for National Statistics released the public sector borrowing figure that measures the difference in value of the spending and income of the public corporations as well as the central government of the UK and other local governments during the last month.

A positive public sector borrowing figure would indicate a budget deficit and a negative figure would indicate a budget surplus. Hence, a negative figure is usually taken as a good news for the British Pound.

Last month, the UK public sector borrowing figure came out at $11 billion, and the forecast for this month was set at slightly lower, at $9.3 billion. However, the actual public sector borrowing figure came out much higher than expected, at $11.1 billion.

Trade Recommendation for the GBP/CHF

Chart GBPCHF, D1, 2014.10.21 12:30 UTC

The GBP/CHF was trading in a range bound price action for last few months. Regardless of the increased volatility in October, it has managed to swing between 1.4990 and 1.1550. Last week, the GBP/CHF bounced from the support level around 1.4990 and formed an inside bar reversal pattern. Today, as the Swiss trade balance figure came out better, the market was expecting the pair to test the support around the 1.5150 level. However, so far, it has climbed higher during the day and on the verge of testing the resistance level at 1.5300.

There is a high probability that the GBP/CHF will form a bullish outside bar, and if the pair manage to close above 1.5300, it would certainly attract further long positions. Hence, it would suggest a CALL in the GBP/CHF.

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About our Forex Analyst: Asif Imtiaz

Asif Imtiaz

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