- The British pound rallied in the early hours of Wednesday trading to reach the 1.07 level.
- However, we have given those gains back and we now find ourselves near the 1.0650 level again, forming an inverted hammer.
- When you look at the longer term chart, you can see just how important the area between 1.0650 and 1.06 is as far as support is concerned.
- Therefore I'm at least willing to take a flyer on this, recognizing that odds are somewhat against me in this current environment, but I do recognize that the risk of reward certainly lines up quite nicely.
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This is because anything below the 1.06 level has the high likelihood of seeing a significant breakdown. Do I think this is the end of the downtrend? No, not at all. But I do think that we are trying to find some type of bottom. And this could be a triple bottom. We'll just have to wait and see. If we were to break above the 50-day EMA currently at the 1.0763 level, then maybe you can start to talk about a deeper and much more long lasting recovery. You do get paid to hang on to this pair.
I think ultimately that could be the saving grace of the British pound against the Swiss franc. But at this point in time, it's obvious that we just don't have a lot of upward trajectory. I think we're just bumping along the bottom here, trying to find a reason to get bullish.
Sooner or later, something will come along and that might be more of a risk on type of headline that people go running into this pair to take advantage of. After all, nobody likes paying swap at the end of every day for a longer term trade. This is a very clear situation of risk appetite getting eviscerated out there.
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