The British pound weakened against the Swiss franc for the fourth day, but looks to be finding short-term support near the 50-Day moving average (1.7743), and the GBP/CHF may continue trend higher over the near-term as market sentiment improves. After reaching a high of 1.8976 in November, the pound-franc slipped to a low of 1.5124 on 12/29 following the rise in risk aversion however, the rebound in market sentiment has led the pair higher throughout the first half of year, and the GBP/CHF should continue to trend higher over the near-term as investors speculate the Bank of England to tighten policy over the next 12 months. Credit Suisse overnight index swaps are higher by nearly 100bp as investors anticipate the BoE to hike rates in the following year, and expectations for an economic recovery later this year may continue to support the rise in the interest rate outlook as growth prospects improve. Over the next few hours of trading, we may see the pound-franc continue to push lower to retrace the advance from the end of July however, as the RSI approaches oversold territory, further moves to the downside are likely to be capped, and we may see the pair bounce back to fill-in the gap from the 120 SMA at 1.7888. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
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