GBP/CHF fell during the session on Friday but bounced in order to form a hammer. This hammer is very interesting to me as it is on the uptrend line of a big up trending channel that we've been in for some time. Because of this, I feel that this pair is ready to start gaining again.
Add to that the fact that the British pound looks solid overall, and this is a fairly simple trade for me. On a break of the highs from the shooting star on Thursday which I see as the 1.52 level, I would be more than willing to go along of this pair. Remember, the Swiss National Bank is working against the value of the Swiss franc right now, so they certainly would not get in the way. In fact, they have actually admitted to the fact that they have been buying this pair in order to diversify into the British pound.
The British pound should continue to gain against many of the currencies around the world and especially Europe, as Mervyn King the head of the Bank of England has recently stated that the monetary policy is right around where it needs to be. In other words, they are going to keep rates and a relatively high level considering the neighborhood, and as such there should be money flowing into the United Kingdom for the foreseeable future.
Up trending channel and hammer
It's very rare that we see a perfectly placed hammer like we have from the Friday session. This is why I'm so interested in this pair right now. I think once we get going, we could see the 1.55 handle as this pair continues to grind higher. This pair does tend to move very rapidly in one direction or the other, so you should get your answer fairly quick.
If we manage to break down below the bottom of this hammer from the Friday session, I would think that this pair continues lower. I do however see that the 1.50 level more than likely would be support as well, so the move down could only be somewhat of a limited length. Overall, I really like this trade the long side.