- The British Pound has rallied quite nicely against the Swiss Franc during trading on Wednesday as the 50-day EMA continues to offer a bit of support.
- That being said, this is a market that’s been range-bound for some time, and I think when you look at the overall attitude, the 1.14 level is really what needs to be taken out in order to get overly bullish.
- If we can and do eventually take out the 1.14 level to the upside, it opens up a move to the 1.16 level.
Currently, we have not only the 50 day EMA underneath pricing, but we also have the 200 day EMA, which is much like the 50 day EMA in the sense that it’s pretty flat. This suggests that we don’t have anywhere to be.
But I am watching because this latest pullback, if it were to hold, is a much shallower pullback than we had seen over the last several months. That means inertia could be building to the upside, and that does make a significant amount of sense due to the fact that Switzerland has such a small interest rate. The Swiss National Bank recently cut rates by 50 basis points in a bit of a panic move, while the Bank of England, although it did cut 25 basis points last time, really remains head and shoulders above Switzerland as far as interest rates are concerned.
Swap Could Matter
You get paid to hang on to this GBP/CHF pair at the end of every day. And I think a lot of traders out there will be paying attention to that. Again though, the biggest hurdle right now is the 1.14 level and the lack of ability to break above there. That could come to an end soon, but we’ll have to wait and see. I do expect a lot of noise and choppy volatility, but I also expect that sooner or later we have to break out of this range, which has a measured move of 300 pips based upon the rectangle, if you will, between 1.14 and 1.11 underneath. In other words, if we can break out, we could go as high as 1.17 before it’s said and done.
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