GBP/CHF – Potential for Upside Break

GBP/CHF – Potential for Upside Break

Fundamentals

Despite the weakness in U.K. data, policymakers are rallying behind the idea of an earlier rate rise and even with the disappointments the U.K. has an economic lead against other major economies. Next week the PMI reports are scheduled for release and if the indicators stabilize or improve and they eventually will, it could be just what sterling traders need to see to reinitiate their long trades. At the same time, the Swiss Franc is getting dangerously close to intervention territory. The Swiss National Bank is committed to maintaining a minimum exchange rate of 1.20 in EUR/CHF and on Monday, the currency pair dropped to a 20 month low of 1.2072. We haven’t heard a peep from the SNB but if the Franc continues to rise in value, at minimum we expect verbal intervention. So with the upside in the Franc limited and sterling poised for a stronger recovery, we believe that GBP/CHF will break above 1.52 and head towards it monthly highs.

Technicals

Technically, there is a small ascending triangle forming in the currency pair that reinforces its upward bias and the importance of a 1.52 break. If this level clears, the next level of resistance is above 1.53. On the downside, the break below 1.51 would expose the currency pair for a move down to 1.50.

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