- GBP/CHF extended its advance on Monday as the pair tested 1.0750, a former resistance zone.
- Ongoing SNB discomfort with franc strength supports the move, while pullbacks toward 1.07 or 1.0650 may offer buyers opportunities within the broader upward trend.
British Pound continues to see strength against the Swiss franc as we are testing the 1.0750 level. This is an area that previously had been resistant back in the early part of October, and it's worth noting that we've had quite a bit of upward momentum since then. I think ultimately this is a market where short-term pullbacks continue to get bought, despite the fact that the Bank of England is likely to cut rates later this month.
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SNB Influence and Support Levels
This is mainly due to the Swiss National Bank, which, of course, is very vocal about its displeasure with the strengthening Swiss franc over the last several months. In fact, they've already stated that they are monitoring Forex markets, which is essentially a veiled threat to intervene, which the market, of course, understands.
With that being the case, I think we could go looking to the 200-day EMA, which is near the 1.0850 level, but a short-term pullback does make a certain amount of sense because we have gotten a bit ahead of ourselves. The 1.07 level, followed by the 1.0650 level, both could offer support. Remember that the interest rate differential, even if the Bank of England cuts interest rates next month, will continue to favor the British pound, so therefore it should favor a recovery unless, of course, there is some type of financial meltdown.
The British pound is probably one of the better performers against the Swiss franc over the last couple of weeks. Although you can say the same thing about the US dollar, the Euro, or a multitude of other currencies. In other words, this pair and this trade setup are about the Swiss franc, not necessarily the British pound.
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