GBPCHF Tries Again at 1.20 On Hawkish BOE Comments
The GBPCHF cross broke higher out of a bullish flag consolidation and now threatens to move above 1.20. As we get closer to the end of the month, the GBP benefits from hawkish rhetoric from the Bank of England regarding negative rates implementation.
Bank of England Talks Down Negative Rates Implementation
Early in the London session, the BOE’s Dave Ramsden, the Deputy Governor, Markets and Banking, came out with some hawkish statements regarding the bank’s policy. Only recently the BOE announced that it is studying the introduction of negative interest rates in the kingdom.
On the news, the GBP fell across the board – GBPUSD dropped over seven big figures, while the GBPCHF was knocked down from 1.22 to 1.16. But last week, BOE’s Governor downplayed the imminence of negative interest rates introduction, just like Ramsden did today.
According to Ramsden, the engagement with banks on negative rates will take some time, so the market should not expect a quick implementation. In other words, he outlined that the bank is mostly looking at exploring in more detail the implications of such a move before the actual implementation takes place, if ever.
Needless to say, the GBP reversed sharply across the board. The GBPCHF is one of the biggest winners, especially considering the fact that the all-important 1.20 level is just around the corner.
GBPCHF Technical Analysis
The cross continues its consolidation below the 1.20 level with the focus sitting on a possible break higher. The measured move points to much higher levels, if we consider the consolidation as a giant bullish flag.
In any case, bulls want to see a clear break above the 1.20. As such, it makes sense from a bullish perspective to buy a break above 1.2050 with a stop loss at 1.1875 and target the measured move of the bullish flag several hundred pips higher. Ideally, bulls should trail the stop by the time the rr ratio exceeds 1:1 and then simply follow the market as it moves higher.