Potential Signal: I am a holder of this pair. I would have a stop loss of 200 points, as this is a longer-term trade. Once over the 1.15 level, I would add another 25% to the position.
- The British pound has rallied rather significantly during the trading session here on Monday, and the Swiss franc continues to be a funding currency, if you will.
- It's likely that we continue to see more upward pressure as the interest rate differential between the two economies is so wide.
With that being the case, I am paying close attention to the 1.15 level above. I think that is a major barrier. When you look at the longer term charts, it is most certainly an area that a lot of people will be interested in getting in if we can get a bulb there. In fact, it opens up a move to about 1.20 before it's all said and done. In fact, I think we could continue to go much higher, and could see a lot of long-term “buy and hold” attitudes.
Pullbacks Could Be Opportunities
Short term pullbacks at this point, I think continue to be buying opportunities as the interest rate differential continues to get you paid at the end of every session. So do keep that in mind. Therefore, I don't have any interest in shorting. And with the massive move that we've seen to the upside here in the market over the last several months, I think we are in the process of changing the overall trend.
Remember, the Swiss National Bank recently cut rates. They are the first major central bank in the world to do so. And therefore, it puts the Swiss franc on the back foot. The 50 day EMA sits right around the 1.1275 level. I think that's your short term flaw. Every time we pull back, I'm looking at this as a potential buying opportunity, but also recognize that this pair can be somewhat volatile, so you have to keep that in the back of your mind as well.
Ultimately, you get “paid to wait” until we finally break out. While we could turn things around and fall, I find that very unlikely at this point in time, and therefore I am still bullish of this pair overall. I will continue to hold Pounds over Francs.
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