- The British pound has plunged early in the trading session on Wednesday against the Swiss Franc, but we are approaching a major support level.
- I think given enough time we could very well see a bit of a turnaround as the 1.15 level of course is a significant area of previous resistance and should now be support based on market memory. We'll just have to wait and see whether or not that can actually happen.
All things being equal, this is a market that given enough time, I do think, will find buyers and continue to go higher, especially considering that the interest rate differential continues to drive this pair higher. With this, I like the idea of finding any value I can and taking advantage of cheap British pounds.
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The 50 day EMA is near the 1.1450 region and rising. So, I think that also could come into the picture. But as things stand right now, you've got a situation where market participants continue to see this as a decent, longer term carry trade type scenario. After all, you do get paid quite handsomely to hang on to this pair at the end of each and every day. Longer-term minded institutional traders certainly love this idea, plus the fact that the United Kingdom is dealing with inflation while the Swiss have already decided to cut rates leads even more credence to the idea of the market going higher.
Ultimately, I do think that eventually we will take off to the upside and break above the recent high near 1.17. But obviously we have some work to do. There was a major risk-off type of move during the early hours of the session and you know, that's been shown here as the Swiss franc of course is almost always thought of as a safety currency. Because of this, think you got a situation where the market will continue to be noisy, but I still favor the upside of the longer term. If we can break out to the upside in clear the most recent swing high, I think the pair could easily go to the 1.20 level above.
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