The British pound continues to enjoy a wide differential from the Swiss franc, and the action over the last week looks more or less like a consolidation area playing out.
Buying the dips continues to be a favorable trade.
The British pound initially tried to rally against the Swiss franc during the trading session on Friday, but gave back some of the gains as we continue to see a lot of noisy back-and-forth trading. Overall, this is a market that I think continues to be thought of through the prism of the carry trade.
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The 1.11 level is an area that is a large, round, psychologically significant figure
The carry trade, of course, is going to favor the British pound over the Swiss franc as the market continues to see a lot of upward pressure, despite the fact that it has been a little lackluster on Friday. The 1.0950 level underneath is support as well.
With traders continuing to see a lot of momentum to the upside over the longer term, it is likely that we will remain in one of those scenarios where the market is trying to get to the 1.11 level. The 1.11 level is an area that is a large, round, psychologically significant figure and an area that could cause a little bit of resistance. This is an area that I continue to watch and will be looking to take advantage of any move in that overall direction.
It is not until we break down below the 1.08 level that I would be worried about this trend. Ultimately, this is a market that continues to see a lot of choppiness and volatility. But if you are patient enough, you do get paid at the end of every day, and this opens up the possibility of the longer-term trade playing out positively.
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