The British pound continued to weaken against its currency counterparts throughout the week, with the GBP/CHF retracing the advance from June, and the pair is likely to face increased volatility over the next 12 hours of trading as market participants speculate the Bank of England to expand its asset purchase program this month.
Currency Pair: GBP/CHF
Chart: 60 Min Charts
Short-Term Bias: Flat
Analysis
The British pound continued to weaken against its currency counterparts throughout the week, with the GBP/CHF retracing the advance from June, and the pair is likely to face increased volatility over the next 12 hours of trading as market participants speculate the Bank of England to expand its asset purchase program this month. After reaching a high of 1.8976 in November, the pound-franc slipped to a low of 1.5124 on 12/29 as investors curbed their appetite for risk, but the turnaround in market sentiment has led the pair higher throughout the first half of year, and the pair may continue to trend higher over the near-term as investors anticipate the BoE to tighten policy over the next 12 months. As a result, long-term expectations for higher interest rates may lead the GBP/CHF higher over the near-term however, as Governor Mervyn King expects a slower recover in the U.K., speculation for further easing could weigh on the exchange rate going forward. Over the next few hours of trading, the pound-franc is likely to hold steady ahead of the BoE interest rate decision, and may find support at 1.7500-10 (61.8% Fib) as economists forecast the central bank to keep a floor on the interest rate however, if the MPC takes further steps to stimulate the ailing economy and utilizes the remaining GBP 25B allotted by the Chancellor of the Exchequer, we may see the pair break below the 61.8% Fib to test 1.7040-50 (50.0% Fib) for near-term support. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
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