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GBP/CHF Forecast: Pound Rebounds vs Franc

By Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
  • During early trading on Friday, the British Pound had crumbled pretty drastically against the Swiss Franc.
  • But somewhere near the 1.1160 level, we saw the British Pound turn around and it ended up forming a bit of a hammer.
  • This is a very bullish sign and it's also worth noting that we are near both the 50-day EMA and the 200-day EMA indicators.

Because of this, I think it suggests that the market is going to stay somewhat stable. When you look at the chart, it's easy to see that the 1.11 level had been significant support multiple times in the past several months, while the 1.1350 level above is significant resistance. Furthermore, the 1.1350 level also had been support multiple times earlier in the year, so we have a lot of market memory there just waiting to happen.

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Interest Rate Differential

The interest rate differential favors the British pound, so I like the idea of owning the pound against the Swiss franc, and therefore I am a buyer on a break above the top of the candlestick. Now the question then becomes whether or not we can break above the 1.1350 level. That's a completely different question, but if we do then I would probably get fairly aggressive.

GBP/CHF Forecast Today 23/12: GBP Rebounds vs Franc (graph)

I have no interest in shorting this GBP/CHF market because the interest rate differential works against you. With the Swiss National Bank recently cutting interest rates by 50 basis points, in somewhat of a panic, that tells me that the Swiss may actually go negative. If they do, it's going to eviscerate the Swiss franc. At the same time, the Bank of England still has fairly reasonably high interest rates. So, I think you've got a situation where eventually we go higher.

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Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

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