Potential signal:
- I am buying here.
- I would have a stop at 1.0890 and a target of 1.1050.
- The British pound initially fell against the Swiss franc during trading on Monday, testing the 1.0950 level, an area that has been important in the past.
GBP/CHF
The British pound initially fell against the Swiss franc during trading on Monday, testing the 1.0950 level, an area that has been important in the past. But really at this point in time, what I'm noticing more than anything else is that buyers are willing to jump in and get long here. We are seeing some defense of that area.
It's an uptrend, so that makes sense. And of course, you get paid at the end of every day to hang on to the British pound against the Swiss franc. So as long as that's the case, it does make a certain amount of sense that we continue to see some interest in going long this GBP/CHF pair.
Top Regulated Brokers
Carry Trade Dynamics and Central Bank Policy
Ultimately, I do think it is a scenario where we go much higher. The carry trade is most certainly in vogue, and the British pound itself is relatively strong. Mix that against the Swiss franc, which, although a safety currency, and you can make an argument for that right now, has the central bank that is clinging on to a 0% interest rate policy, and therefore, it makes the currency very unattractive.
Furthermore, if we were to see a sudden breakdown or meltdown in the Swiss franc, it's very likely we would eventually see the Swiss National Bank intervene as well. Simple momentum; it just looks positive with the Bank of England still possibly having to raise rates. This is a good move. We just recently broke out of that 1.0950 level and tested it today. So, this could be the entry.
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