Potential signal:
- I am buying here, with a stop-loss at 1.09 and a target of 1.1080.
- The British pound has fallen a bit against the Swiss franc, as we are still in a situation where the carry trade could be a big boost.
GBP/CHF
The British pound has dropped against the Swiss franc during trading on Tuesday to test the crucial 1.0950 level. The 1.0950 level is an area that has been important a couple of times in the past, and it is probably worth noting that the 50-day EMA sits just below, so that could offer a bit of support as well.
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The interest rate differential continues to be a major factor here, as the carry trade is alive and well when shorting the Swiss franc, with the Swiss National Bank more than willing to keep interest rates at 0% going forward. That being said, the Bank of England is a little bit different than many other central banks, as they are probably in the camp of being neutral, possibly even shifting a little bit to a dovish tinge.
All things being equal, though, I think this ends up being a nice buying opportunity that we can take advantage of
The carry trade is a major mover of things, and this is a market that has been in an uptrend for quite some time. To the upside, we have the 1.1050 level offering resistance, and it could be a potential target.
Breaking down below the 50-day EMA would be bearish, and at that point, I would be watching the 1.09 level. All things being equal, this is a pair that pays you at the end of every day to hold it, and I do believe that one of the major drivers here will actually be the Swiss central bank, not the English central bank, as they are so much in the camp of hanging around the 0% interest-rate situation. They are extraordinarily stubborn when it comes to that, and there is no sign of Switzerland hiking rates at the moment.
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