- The British pound has been all over the place during the trading session on Monday against the Swiss Franc, which makes a certain amount of sense because quite frankly, nobody really knows what they want to do with risk appetite.
- Remember that as risk appetite increases, this pair tends to rise while if there is risk aversion, it tends to fall as the Swiss franc of course is a safety currency. All things being equal, this is a market though that I think is going to continue to look at the 1.14 level as a major barrier that needs to be overcome. If and when we can overcome that area, then I think we could see the British pound really start to take off perhaps towards the 1.16 level.
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On the Other Hand
Otherwise, if we were to turn around and fall from here, the 50 day EMA comes into the picture right along with the 200 day EMA. This is a market that is basically banging up against the top of a well-established trading range between 1.11 on the bottom and 1.14 on the top. However, it's probably worth noting that the British pound is somewhat resilient at this point in time, and it makes quite a bit of sense that we would continue to see more of a buy on the dip attitude as a result. Furthermore, the interest rate differential is extraordinarily wide as the Swiss recently had cut their interest rates by 50 basis points. In that environment, it makes quite a bit of sense that the Swiss franc continues to lose value unless of course there is some type of massive financial shock to the system where people might run to Switzerland for safety. In general, this is a market that I do think is trying to take off to the upside, and it reminds me of the old adage of it being like a beach ball being held underwater. Once it breaks out, it might shoot straight up in the air.
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