Pound climbs as franc continues slide on peg threat

The British pound tops today’s performance chart against a stronger US dollar with a gain of 0.45% an hour into US trade. Surprisingly the sterling has fared rather well after the SNB threatened to peg the haven Swiss franc to the euro. As a result, traders have sought alternatives safety trades as Gilt prices surged on confidence that policy may be well placed for future UK growth prospects. The GBPUSD pair broke above the 38.2% Fibonacci extension taken from the July 18th and August 10th troughs at the 1.63-figure. However an overbought RSI signal and a strengthening dollar suggests this rally may be short-lived as traders seek to book profits ahead of the weekend. Interim topside resistance for the pair is eyed at the 50% Fibonacci extension at 1.6350 backed by 1.6380 and the 61.8% extension at 1.6405. Downside targets are held at 1.6260, with subsequent floors seen at the 23.6% extension at 1.6225 and 1.6180.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

1.6194

20-Day SMA

1.6285

10-Day SMA

1.6293

2011 GBP High

1.6737

The swissie is the worst performer against the greenback for the second consecutive day falling more than 1.16% as traders remain reluctant to hold the currency on fears that the SNB will follow through with its consideration of pegging the franc to the euro in an effort to stem the currencies rapid appreciation. Subsequently the swissie has continued to fall against the dollar noting interim resistance at the 50% Fibonacci retracement taken from the July 8th decline just below the 0.78-figure backed by 0.7850 and the 0.79-figure. Stronger resistance is seen at the 61.8% retracement at 0.7965. Interim support rests at 0.7685, backed by the 38.2% retracement at 0.7625 and 0.7550. An unlikely break here sees subsequent floors at the 23.6% retracement at 0.7410 and the 0.73-figure.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.8158

20-Day SMA

0.7833

10-Day SMA

0.77579

2011 CHF High

0.7069

Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.

Twitter: @MBForex
WEB:
www.fxcm.com

About the Author
Michael Boutros Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.
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