- The GBP/CHF initially tried to rally significantly during the Monday session but has given bank gains rather rapidly to form a bit of a shooting star that is also pressured by the crucial 50-day EMA indicator.
- Ultimately, this is a pair that I am watching very closely this week, because not only do we have a recent rally and consolidation, but we have both central banks meeting on Thursday, and it could lead to fireworks in this currency pair.
Looking at this chart, the market is likely to see a lot of volatility and choppiness between now and then, but I do have a couple of levels that I am watching quite closely. After all, the 1.10 level has been supported, perhaps down to the 1.0980 level. I think that is a significant support level, and if we were to break down below that level, it would continue the overall negativity to reach down toward the 1.08 level. At the same time, there is also a major downtrend line that sits just above and is hanging about the 1.11 level and is also backed up by the crucial 200-Day EMA indicator.
Expect a Big Move
Expect a big move in this pair eventually, because if there’s any divergence whatsoever between these 2 central banks, that will send this market moving rather rapidly. I think the most likely of scenarios is that traders are waiting to see what the Bank of England will do more than the Swiss National Bank. If the English sounds like they are stepping away from tight monetary policy, this is a pair that could really start to take off to the downside. On the other hand, if they sound like they are still going to remain very vigilant with monetary policy being tight, while the Swiss look likely to loosen, that could send this market screaming to the upside.
From a historical sense, we are at very low levels, and quite frankly the Swiss National Bank has probably started to lose its sense of humor when it comes to the strength of the Swiss franc. Granted, they typically follow the EUR/CHF currency pair as a guideline, but the British pound would react in sympathy if we started to see the Franc start to lose momentum.
Potential Signal: I think we are getting close to a turnaround in this pair. That being said, I need to see the market break above the 1.1150 level. If we can break above that level, this market could go looking to the 1.15 level. On the other hand, if we break down below the 1.0980 level, a short-term selling opportunity could open up for about 100 pips to the downside. Once we get down there, the likelihood of the Swiss getting involved only grows.
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