- During the trading session on Thursday, we have seen the British pound all pretty significantly during the trading session on Thursday, reaching down toward the 1.14 level, an area that is important in general.
- As a result I think we have to understand that the “market memory” could come into the picture, and therefore I do think that we have a real shot at this pair bouncing, despite the fact that the British pound is overbought against the US dollar. Against the Swiss franc is a completely different situation.
Keep in mind that the interest rate differential between the United Kingdom and Switzerland is wide enough to drive a truck through, and I think that will remain the case going forward. Because of this, I still like the idea of buying this GBP/CHF pair, and in fact will probably start to look for an opportunity to get long in this general vicinity. Because of this, the market is likely to continue to see a lot of questions asked about risk appetite, but quite frankly the last currency I want to own right now is the Swiss franc.
Technical Analysis
The technical analysis for this pair is bullish in general, but it’s worth noting that the market falling the way it has suggest that we are possibly heading into a massive amount of consolidation, which would make a certain amount of sense, but ultimately we have to keep in mind that eventually, traders will shun Switzerland, as the interest rate differential is so big, and of course the last meeting that we had in Switzerland featured a 50 basis point rate cut out of the blue. I do think that shows signs of panic, and the fact that we have broken above a major resistance barrier does suggest that eventually we could see a bit of follow through.
The “measured move” from breaking out of the recent consolidation suggest that we could go to the 1.17 level, but I do not think that’s going to be an easy trade to take and hang onto. That’s probably the case with most trades right now, so this one won’t be any different.
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