The GBP/CHF pair fell during the course of the day on Tuesday, testing the 1.5250 level again. This is an area that has been supportive recently, as well as resistive in the past. However, this area is a necessarily a major zone, and in fact I believe that it is essentially “fair value” as far as this market is concerned. When you look at the chart, it appears that the 1.50 level is the actual massive support for the consolidation we have been dealing with, and the 1.55 level is the resistance in the same consolidation area.
With that being the case, the 1.5250 level is of course the middle ground, and that of course will be viewed as “fair value.” Because of that being the case, I believe that we will eventually make a decision here, but we could grind sideways for a little while. This pair does have a long history of been very volatile though, so I believe that when the market makes its decision, it will be very obvious.
Risk appetite
Typically, this pair tends to go higher when risk appetite is solid. After all, the Swiss franc is a safety currency, and the British pound of course is something that is a little riskier than the Franc. That being the case, anytime the stock markets get a bit of a boost, it’s not uncommon to see this pair go higher. I do favor break out to the upside and moving towards the 1.55 level but I also see that we have to get above the 1.5350 level in order to break out and make that move.
If we break down below the 1.5250 level on a daily close, and more importantly the 1.52 level, it’s very likely that this market will then fall back down to the 1.50 handle. This is how I’m plane the market, simply trading the range. Eventually we will break out above or below this massive consolidation area, but right now I don’t see any real threat of that.
