Short-Term Forex Technical Outlook: GBP/CHF

04/16/2009 1:51 pm EST

Focus: FOREX

Long-term expectations for higher interest rates in the UK pushed the British pound to a two-month high against the Swiss franc this week, and the GBP/CHF is likely to push higher over the following week as the economic docket for Switzerland is expected to reinforce a weakening outlook for growth and inflation.

Currency Pair: GBP/CHF
Chart: 60-minute charts
Short-Term Bias: Flat

Analysis Update

The GBP/CHF slipped lower during the overnight and may continue to fall over the next few hours of trading as equity futures foreshadow a lower open for the US market, however, as the RSI approaches oversold territory, we may see the pair continue to test the 50.0% for short-term support on the back of long-term expectations for higher interest rates. Over the following week, we are likely to see GBP/CHF continue to retrace the selloff on Feb 10, and may attempt to make a run for 1.7500-10 (61.8% Fib).

However, as the economic calendar for the UK is expected to reinforce a weakening outlook for growth and inflation, deteriorating fundamentals could weigh on GBP/CHF, and may continue to trade within a broad range over the near term. Nevertheless, the fundamental event risks scheduled for the next 24 hours could call for a shift in our outlook.

Analysis

Long-term expectations for higher interest rates in the UK pushed the British pound to a two-month high against the Swiss franc this week, and the GBP/CHF is likely to push higher over the following week as the economic docket for Switzerland is expected to reinforce a weakening outlook for growth and inflation. After reaching a high of 1.8976 in November, the GBP/CHF slipped to a low of 1.5124 in December as investors curbed demands for high-yielding assets, however, as the Swiss National Bank pledges to stem the appreciation in the low-yielding currency, the pair may continue to push higher over the near term as market sentiment improves.

As the European economic calendar remains fairly light, risk trends should continue to dictate price action for the GBP/CHF over the next few hours of trading, and we may see the pair push higher as traders move into higher risk/reward investments, however, as the RSI approaches overbought territory, gains are likely to be capped and we may see GBP/CHF fall towards 1.7040-50 (50.0% Fib) over the remainder of the week to fill in the gap from the 120 SMA.

By David Song, Currency Analyst, DailyFX.com

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