Potential signal:
- While a pullback would be preferred, I would be ok with buying here and holding, with a stop at 1.0880 below.
- The British pound has rallied against the Swiss franc again, as the carry trade continues.
GBP/CHF
The British pound has rallied a bit during the early part of the Friday session against the Swiss franc as we are now testing the crucial 1.10 level. The 1.10 level, of course, is a large, round, psychologically significant handle that a lot of people will be watching just because of the psychology attached to it. But when you look at the chart longer term, there’s a little bit of a cluster here and there in this area, but it really doesn’t mean that much.
The interest rate differential continues to favor the British pound, and the Swiss National Bank, of course, is nowhere near tightening monetary policy. They have ultra-loose zero interest rates, and that makes this a great candidate for carry trading, just simply holding for the long term. Short-term pullbacks, I believe, continue to offer opportunities for people to get involved who aren’t involved.
Carry Trade Momentum and Support Levels
It’s been a nice grind higher against the Swiss franc in multiple currencies, not just the British pound, but with the British pound interest rate being higher than many others, that makes this even better. I like this pair in general. It’s a good way to play risk appetite and the carry trade when it’s in vogue. And right now, when you look around the forex world, the carry trade is most certainly in vogue.
Pullbacks at this point in time should see a lot of support at 1.09, 1.0850, and the 50-day EMA at the very least. I do think we continue to go higher. That doesn’t mean we go in a straight line, but I like the idea of adding to my position every time it pulls back like I’ve been doing with the dollar against the yen and the dollar against the franc.
This has just been a nice grind higher. It’s been easy money if you are patient. And that’s the key: you have to be willing to hold.
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Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions
As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire
