- The GBP/CHF pair isn’t one that a lot of people pay attention to, and it is to their detriment.
- The market is one that pays a strong swap at the end of the day, and this has just been given a bit of a boost, as the early morning hours have seen.
The Backdrop
The Swiss National Bank has decided to cut rates perhaps earlier than most people thought. So, at this point in time, it's not a huge surprise to see that the Swiss franc has lost quite a bit of strength against most currencies. It's not just the British pound that we are seeing. So, all things being equal, if we see a bit of a pullback, then it is value because the Swiss franc is not a currency you want to own anymore as the Swiss are now the first central bank to start the process of easing monetary policy. The Swiss franc has now become the funding currency of choice now that the Bank of Japan has decided to raise rates, although only nominally.
With this being the case, I think that short-term pullbacks continue to be buying opportunities and we should continue to go much higher. The initial target in this pair is going to be the 1.15 level. And if we were to break above there, then we would go much, much higher. Short-term pullback should see plenty of support near the 1.13 level. The 1.13 level is an area that previously had been a little bit of resistance, but recently we've also seen the so-called golden cross as the 50-day EMA has broken above the 200-day EMA. We are a little extended, but quite frankly, I think anytime you see a pullback, there will be plenty of value hunters coming in to pick this pair up.
I am looking forward to holding this pair for months, perhaps even all the way until the end of the year. The markets will continue to focus on whether or not the central banks will all cut, but who will be the “weakest”, and it appears that the Swiss have volunteered to take that position.
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