- GBP/CHF softened slightly after a strong multi-week rebound, with traders watching support near 1.07 and interest-rate differentials that still favor the Pound.
- A broader bottoming attempt appears underway, though a modest pullback may be necessary.
The British Pound is looking just a little bit softer in the trading session on Tuesday against the Swiss Franc, which makes a certain amount of sense considering that the market has bounced quite significantly over the last couple of weeks. At this point, we are on the verge of trying to break above the 1.0750 level, but I also recognize that a short-term pullback could take a look at the 1.07 level for support and then again the 1.07 level as the 50-day EMA is starting to reach towards that area.
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Ultimately, the interest rate differential continues to favor the British Pound and will going forward as you can simply hold onto this pair and make a certain amount of money. Looking at this chart suggests that perhaps we could go to the 200-day EMA near the 1.0840 level.
Bottoming Attempt with Potential Pullback
Ultimately, this is a market that I think is in the process of trying to bottom, but it has bound so much that I think you have to recognize that maybe a little bit of a give back is probably necessary. If we were to break down below the 1.06 level, then I think you have a scenario where the market will start to break down. But keep in mind that the Swiss National Bank is likely to protect the Franc in the sense that it got too strong before, and they were complaining about it. I think that ends up being one of the things that keeps the British Pound afloat against the Swiss Franc, despite the fact that we have an interest rate cut coming later this month out of London.
The Swiss will intervene if the Franc gets too strong, but we're nowhere near that point at the moment. Ultimately, you'd have to watch other pairs for that, but this pullback, for me at least, is going to offer a certain amount of value. I plan on buying on the right-hand side of the V.
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