- The British Pound has bounced significantly from the 50 day EMA against the Swiss Franc in early trading on Monday as we continue to see the markets come in and try to pick up the momentum.
- The 1.13 level underneath will continue to be significant support from everything I see here, and I do think that eventually the British Pound tries to trade at the 1.15 Swiss Franc level.
- This is an area that I am watching closely.
The 1.15 Swiss franc level has been a massive ceiling in this pair, and I do think that given enough time, we will have to decide whether or not we can break through there. It does look to me like we are building the pressure and that makes a lot of sense. Remember, it wasn't that long ago that the Swiss National Bank decided to cut interest rates and therefore the Swiss franc started to lose strength against almost everything.
The Franc is a Funding Currency
At this point, it has essentially become a funding currency for carry traders around the world. That is the natural state of the Swiss franc. As the Swiss franc is trading at a historically high level, the Swiss are perfectly OK with watching their currency lose value. This is in stark contrast to the other major funding currency, the Japanese yen which of course their central bank is trying to prop up the currency. Because of this I do believe that the Swiss franc takes it on the chin against almost everything and the British pound is yet another thing that you can buy against the Swiss franc.
Longer term trading suggests that if we were to break above the 1.15 level then the British pound could trade to the 1.21 Swiss franc level although we don't know what kind of momentum it would have. It would be more or less a longer term swing trade. If we were to fall from here, the market breaking below the 1.13 level would then immediately pay close attention to the 1.12 level where the 200 day EMA resides.
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