- In my daily analysis of the pound against the franc I am seeing a lot of noisy behavior.
- I think at this point we are just simply trying to sort out whether or not we are going to have more risk taking or more risk aversion in the markets.
It's worth noting that Friday has seen the GBP/CHF pair test the 50 day EMA, which of course is an indicator that a lot of people pay attention to and has acted as a trend line of sorts multiple times in the past. We also recently had a bounce from the 38.2% Fibonacci retracement level, and maybe even more importantly, the 200 day EMA.
With all that being said, you should also keep in mind that there is a major difference in interest rates and therefore it does make a lot of sense that people will continue to hold on to this pair. If we can break above the 50 day EMA, then it opens up the possibility of a move to the 1.1450 level and then possibly even the 1.15 level.
One of My favorite Carry Trades
I do like holding this pair because you do get paid so much at the end of every day. But I also recognize that it is a very volatile pair, so you have to be somewhat cautious with your position sizing. In fact, doing the carry trade in a pair like this is a bit of a balancing act because you obviously want to get paid, but you don't want to be overexposed in case there is a sudden sell off.
Keep in mind that the Swiss franc is considered to be a safety currency. So if we start to see some type of meltdown with risk appetite, that could send this pair plunging. On the other hand, if the Swiss franc continues to suffer at the hands of so many other currencies, that might continue to push this market higher. The candlestick on Friday was somewhat neutral, so I suspect we may get a little bit of a pullback.
But as things stand right now at the first signs of a bounce, I'm more than willing to add to my position after a short term pullback. Longer term, I fully anticipate that we will go looking to the 1.15 level. Given enough time, maybe even higher than that.
Want to trade our daily forex analysis and predictions? Here's a list of the best FX brokers in Switzerland to check out.