- During the Thursday session we have seen the British pound drop rather significantly against the Swiss franc and at this point in time we are reaching a major inflection point.
- It’s worth noting that the previous trendline is now being tested, and we are just below the 200-Day EMA as I record this.
- That being said, there is a lot out there that could come into play in order to cause quite a bit of volatility in this market.
The Technical Analysis
The previous downtrend line offering support does make a certain amount of sense so I do anticipate that there will be some buying pressure here. Furthermore, the 200-Day EMA will be important as well, so we need to pay attention to that also. If we can recapture that level, then I think it’s probably only a matter of time before the British pound goes racing toward 1.10 level again. After all, that’s an area that we had pulled back from, and it does make a certain amount of sense that we would see a revisit and a retesting of that resistance barrier.
On the other hand, the 1.10 level underneath could be an area that traders target, perhaps offering a bit of support. That support will be tested rather vigorously because not only is it a large, round, psychologically significant figure, but it is also where the 50-Day EMA currently is racing toward. I think if we break down below that level, then we see the British pound really start to unravel against the Swiss franc.
Even mind that the interest rate differential does favor the British pound against the Swiss franc, and of course it’s worth noting that the Swiss franc has struggled as of late. The Swiss National Bank certainly has no issue whatsoever with the Swiss franc falling apart, because it is historically strong, and that of course brings quite a few problems into the Swiss economy as far as exports are concerned. That being said, they typically pay more attention to the EUR/CHF pair than this one, but it all ties together.
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