- The British pound edges higher against the Swiss franc, supported near 1.06, with risk sentiment and Swiss National Bank behavior central to the outlook.
- Upside momentum favors long positions, while shorts remain unattractive.
The British pound has rallied slightly against the Swiss franc, as we continue to see a certain amount of support right around the 1.06 level. Keep in mind this is a very risk-sensitive currency pair, so you do have to watch what's going on.
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If we were to break down below the 1.06 level, then a little bit of a head and shoulders would have signaled a drop lower, maybe down to the lows of about 1.0450. That being said, this is a pair that is going to pay you to hold it to the long side and is a little bit different in the sense that the Swiss National Bank is very protective of the currency at times.
Swiss National Bank Influence and Trade Bias
They do not like the Swiss franc getting too strong, too quick, and they came out and basically told the market recently that they were starting to lose their sense of humor. Now, the Swiss won't necessarily react against the British pound itself, not directly, but if the euro drops against the Swiss franc too rapidly, you have to get rid of your Swiss franc longs.
So, with that little bit of analysis, I am long only anything that's denominated in Swiss francs at the moment, like this pair. So, what I'm looking for is a little bit of momentum. If we can break above the 1.0650 level, then I'm okay taking a crack at a long here.
I also recognize that if we can break above the 200-day EMA currently at the 1.0826 level, that could become a buy-and-hold scenario where you get paid every day to hang on to this asset. I don't have any interest in shorting, although I can make an argument that we would break down. But with the central bank out there swimming around like a shark in the water, I'd rather take my chances getting paid every day going to the upside. All I need now is a bit of momentum.
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