- The British pound fell during the early hours on Wednesday as we continue to see a lot of volatility in the GBP/CHF pair.
- That makes a lot of sense, because quite frankly this is a market that is very noisy, and it makes quite a bit of sense that we would see a lot of choppiness in this region.
- It’s also worth noting that the 50-Day EMA sits just below current trading, so there is a little bit of technical support in that region.
All that being said, the market is likely to see a lot of interest in this area, especially as the 1.13 CHF level is an area that we have seen action on previously. However, if we were to break down below there then it’s likely we will see a move down to the 200-Day EMA, which just so happens to be at the large, round, psychologically significant figure of 1.12 CHF below.
Bank of England and Swiss National Bank
The Bank of England has an interest rate decision on Wednesday, and that will obviously have a major influence on what happens in this market. However, not much is expected to change and therefore I anticipate that any selling pressure at this point in time will more likely than not end up being a nice buying. After all, the Swiss National Bank has already shown its proclivity to be loose with monetary policy, as they have already cut interest rates, and were the first major central bank in the world to do so, with only Sweden joining them over the past 24 hours. In other words, it’s very likely that we will continue to see the Swiss franc used as a funding currency in carry trading.
Above, we have the 1.15 level as a major resistance barrier, and if we can break above that level, then it’s likely that the market will go much higher, perhaps as high as 1.1750, or maybe even as high as the 1.20 level after that. That being said, it is going to take a lot of momentum to make that happen, and therefore I don’t think it’s going to be an easy thing to happen.
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