Technical Look at GBP/CHF Cross

07/30/2009 12:01 am EST

Focus: FOREX

The British pound advanced against the Swiss franc this week, with the rally supported by the rising trend in the 50-day moving average. The GBP/CHF may continue to push higher over the remainder of the week as the economic docket is expected to reinforce an improved outlook for the UK.

Currency Pair: GBP/CHF
Chart: 60-minute Charts
Short-Term Bias: Bullish


Click to Enlarge

After reaching a high of 1.8976 in November, the pound/franc slipped to a low of 1.5124 on December 29 as investors curbed the appetite for risk. However, the turnaround in market sentiment has led the pair higher throughout the first half of year, and the pair is likely to hold the rising trend over the near term as investors speculate that The Bank of England may tighten policy over the next 12 months.

Credit Suisse overnight index swaps show investors are pricing a 100bp rate hike by the BoE next year, and expectations for higher borrowing costs may continue to drive the British pound higher against its currency counterparts over the near term. In upcoming trading, we may see the pair continue to push higher as UK mortgage approvals are expected to rise in June, and we may see the pair continue to retrace the selloff from earlier this month as the economic outlook for Great Britain improves. However, as risk trends continue to drive price action in the foreign exchange market, a rebound in risk aversion could weigh on the GBP/CHF and may lead the pair to fill in the gap from the 120-period SMA as the low-yielding currency continues to benefit from safe-haven flows.

By David Song, Currency Analyst,


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