The British pound has gone back and forth during the early hours on Thursday as traders are debating whether or not it can break out.
The British pound has gone back and forth during the early hours on Thursday, and it does continue to hang around this crucial 1.0750 level. This is a pair that I am watching quite closely because of a whole host of reasons.
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First, let’s talk about the Swiss National Bank and the Bank of England. The Swiss National Bank, of course, has stated it does not like the sudden moves in the Forex markets. In other words, it doesn’t like the strengthening of the Swiss franc. At the other end of the equation, you have the Bank of England, which is stubbornly persistent in dragging its feet with further rate cuts, somewhat like the Federal Reserve.
So, this does set up an interesting dichotomy between these 2 currencies. You have the British not necessarily being overly dovish, and you have the Swiss, who are willing to intervene. Marry that with the idea of an interest rate differential that does favor the British pound for ages, it would take a multitude of cuts to change that coming out of London. Then you have the perfect setup for a market that, all things being equal, should go higher.
An Official Trend Change
The 200-day EMA is currently at the 1.0807 level, and I think if we can break above there, we have an official trend change. Short-term pullbacks more likely than not will continue to see the 50-day EMA offer support, followed by the 1.06 level.
I would expect a lot of volatility. This pair is pretty choppy under the best of circumstances, but once it makes up its mind, it really gets going. And that’s what I’m watching. This is a pair that I am comfortable holding, mainly because I get paid at the end of every day. In fact, I am short the Swiss franc against a multitude of currencies, and I think ultimately this is probably the market consensus. Even if we fail here, it is probably only a matter of time before this little inverted head and shoulders really kicks this market off to the upside.
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