The British Pound fell against the Franc early on Tuesday but has seen buyers later in the day.
GBP/CHF
The British Pound has initially fallen a bit against the Swiss Franc to break down below the 1.06 level but then turned around to show signs of strength. In fact, at this point, I think you've got a situation where the 200-day EMA being tested makes a certain amount of sense. It is a trend defining moving averages that a lot of people will be watching.
With that being the case, if we can break above the highs from the Tuesday session, this could be a meaningful break to the upside. Keep in mind the interest rate differential between the two makes a huge difference. With this being said, short-term dips I think are buying opportunities.
Key Technical Levels and Carry Trade Potential
The 1.0630 level is an area that a lot of people have been watching. It was previous resistance, so market memory should come into play. If we can break out and really start to rally, I think the 1.08 level is an area that a lot of people will be trying to get to. It's a large round psychologically significant figure, but more importantly, it's a structurally resistant area.
With that being the case, I like the idea of buying this pair but maybe waiting for a little bit of a dip. You get paid at the end of every day and that interest rate differential does add up over time. I love shorting the Swiss Franc whenever we get an opportunity.
If we break down from here, the 50-day EMA currently at the 1.0556 level or so ends up being a bit of a short-term floor. Underneath there, we have the 1.05 level as an area for a floor in the market. With this, I don't have any interest in buying the Franc, not only because of the carry, but the fact that the Swiss National Bank has already threatened to get involved if we do in fact start to see the Swiss Franc strengthen too much. So, I think eventually we do break higher.
Potential signal: If the market closes above the 200 Day EMA on a daily candle, I am buying with a 150 pips stop, aiming for 1.08.