The GBP/CHF slipped lower this week following the rise in risk aversion, and the pair is likely to hold its current range over the near-term as investors weigh the outlook for future policy.
Currency Pair: GBP/CHF
Chart: 60 Min Charts
Short-Term Bias: Flat
Analysis
The GBP/CHF slipped lower this week following the rise in risk aversion, and the pair is likely to hold its current range over the near-term as investors weigh the outlook for future policy. After reaching a high of 1.8976 in November, the pound-franc slipped to a low of 1.5124 on 12/29 due to the drop in market sentiment, and the lack of momentum to retrace the sell-off from December is likely to keep the pair within a tight range over the following week. However, as investors hold long-term expectations for higher interest rates in the U.K., increased speculation for an economic recovery paired with prospects for a rate hike could lead the pair higher over the month but nevertheless, as BoE Governor Mervyn King expects a ‘protracted recovery’ and forecasts inflation to remain below the 2% target until 2012, fundamental headwinds are likely to weigh on the exchange rate going forward. Over the next few hours of trading, we may see the GBP/CHF push higher to fill-in the gap from the 120 SMA but at the same time, falling equity prices are likely to weigh on the broad market, and a downturn in market sentiment could lead the pair towards 1.6580-90 (38.2% Fib) to test for short-term support. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
To contact the author of this article, please email: dsong@fxcm.com
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