Sometimes, the most obvious opportunity is staring you in the face, stubbornly demanding attention as you look past it.
When it comes to forex trading, one of the biggest advantages that traders enjoy is the ability to pair strong currencies with weak currencies, rather than just focusing on the “major” currency pairs. By matching strength with weakness, traders can, in theory, give themselves two ways to be “right” on a trade. The pound/Swiss frac's price action this week provides a perfect case study of this phenomenon.
On Tuesday, we highlighted the potential for more Swiss Franc weakness against both the euro and the U.S. dollar. Meanwhile, we’ve been emphasizing the relative strength of the British pound consistently over the past few weeks (see here, here, here, here, and especially here for more), but we didn’t draw attention to the obvious conclusion: that GBP/CHF was in the perfect position to rally.
And rally it has. Since bottoming near 1.27 in the wake of the Swiss National Bank’s shocking decision to drop the cap on the franc just more than a month ago, GBP/CHF has rallied by nearly 2,000 pips, all the way up to 1.4600 as of writing. In other words, the pair has now retraced about two-thirds of the biggest one-day G10 FX moves in over a decade in just the last month…and no one is talking about it! Perhaps more to the point, the current technical and fundamental pictures suggests that GBP/CHF is well positioned to build on its gains and make a run for the 1.50 level in the coming days.