The GBP/CHF pair pulled back during the session on Monday, but found enough support below the 1.50 level to turn these back around and form a hammer. This is a very interesting candle for me, because a hammer is more than likely going to be supportive. However, if you break down below the bottom of the hammer, that is technically a “hanging man”, a very bearish candle pattern.
With that being the case, if we can break above the top of the hammer, this is an excellent signal for the market to go higher. After all, the 1.50 level is without a doubt a large, round, psychologically significant number. Because of this, I have to believe that large traders are attracted to this area, and with the shape of the candle, that’s another reason to think that we may perhaps go higher. On top of that, there is central bank intervention to pay attention to.
Swiss National Bank
Recently, it has been revealed that the Swiss have been intervening in the Forex markets yet again, selling off the Swiss franc. With that, there is a bit of a “knock on effect” in this pair although more than likely the Swiss have been intervening in the EUR/CHF pair more than anything else. Nonetheless, selling the Swiss franc makes it lose value against most currencies, especially if you do so in large quantities as a central bank tends to do.
On top of that, the British pound does look a bit supported in general, and with that it makes sense of this market goes higher. Also, you have to keep in mind that this pair is highly sensitive to risk appetite, and if stock markets can continue to look healthy like they have, it again makes sense of this pair continues to go higher as money moves away from the safety of Switzerland, and into the trading desks in The City. I believe that the British pound will continue to be one of the better performers, and of course the Swiss franc should continue to soften in general.
