- The British pound initially fell during the trading session on Tuesday against the Swiss franc, dropping below the crucial 1.1280 level.
- However, we have seen buyers come back into the market and show signs of stabilization.
- All things being equal, this is a market that I think continues to see a lot of noisy behavior, but ultimately the British pound will continue to do well against the Swiss franc, assuming that we get through the central-bank announcements this week unscathed.
Both central banks meet
Both the Bank of England and the Swiss National Bank our meeting this week, so therefore I expect to see a lot of noisy behavior. That being said, the interest rate differential continues to favor England, and of course the Swiss are more likely to cut sooner than most other major central banks around the world. I think that continues to be a driver of where this pair goes, and with that being the case I think you have to look at it through the prism of finding value on dips.
The 1.12 level underneath is an area that previously had been resistance, so there should be a significant amount of “market memory” into the picture, and of course we’ve recently just had the 50-Day EMA break above the 200-Day EMA, forming the so-called “golden cross”. This is a market that I think continues to see a lot of upward pressure over the longer term, as the Swiss will almost certainly be much more aggressive in cutting, and quite frankly cannot handle the Swiss franc being as strong as it is for the longer term. The British on the other hand also have to worry about inflation, so they may keep interest rates higher for longer. Ultimately, I think this is a situation where traders continue to look at this through the prism of getting paid at the end of each session, via the positive swap. That should keep this market bullish over the longer term. I have a target of 1.15 at the moment, and therefore like any dip as a buying opportunity.
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