- The British pound had initially fallen against the Swiss franc during the trading session on Wednesday, but the 1.14 level seems to be offering support, as we have turned around and rally at about 50 pips by the time I write this article.
- All things being equal, it does make a certain amount of sense considering that the Swiss franc offers almost nothing in the way of interest, while the British pound is light years away in its interest rate situation.
While we could see interest rates coming down in the United Kingdom and the future, the reality is that you can still drive a truck through the spread of these 2 currencies, and as long as that’s going to be the case, it makes sense to own the British pound, unless of course we get some type of financial meltdown. Importantly, this is a very real possibility in this environment, but as things stand right now, it looks like the British pound is trying to do everything it can to reach “escape velocity” against the Swiss franc and its gravity for safety trading.
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Technical Analysis
The technical analysis for this GBP/CHF pair is slightly positive as we are breaking out of a larger rectangle, and it could open up a move all the way to the 1.17 level if you take the “measured move” of the rectangle we just broke out of. After all, it was 300 points, and breaking out of that level you would expect the same eventually. Furthermore, the 1.17 level is an area that had previously been resistance anyway, so it does make for a nice target.
I believe in the idea of buying dips here, and I have no interest in shorting this pair unless of course we break down below the 1.13 level, and at that point in time I would anticipate that the market probably trying to get to the bottom of the overall rectangle that we just escape from, meaning the 1.11 level, as it is a bit of a magnet for price multiple times over the last couple of months as well.
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