Financial Trading Product Reports

Trading Forex-outlook for GBP-CHF

With financial markets in turmoil, the press is full of speculation about U.S. dollars U.S. and the euro. A lot of care coverage to unprecedented commodities boom, especially record prices for oil and grains. Metals Precious and industrial also draw little attention. Credit and debt markets have been on the covers for a couple of years. Do not forget to stock markets, that both in the U.S. and globally, are experiencing wild swings with seemingly no end in sight.

With so much going on, it is not surprising some very large movements in currencies have escaped attention, or at least wide coverage. Sterling, meanwhile, has not been mentioned so often as it deserves. The same goes for the Swiss franc and, by extension, the cross of the two currencies, GBP, CHF.

Despite being one of the favorite vehicles of financial speculators, this couple seems to be living in a shadow of his cousin, GBP-JPY, which gets more coverage of currency analysts. This is probably due to more height vaunted Japanese yen, while the Swiss franc is well correlated to the euro, which has been losing volume of trade in other currencies, most notably from Australia and Canadian dollars. By some accounts, even Swedish Krone has reached comparable trading volume over a year ago.

That's when Franco began to regain some of its past glory as a safe haven in times of uncertainty and financial turmoil. Swiss central bank began to bust interest rates and CHF made a very impressive ceremony, lasting most of the year. Combined with bearish news from Great Brittan, GBP, CHF, has been selling more from severe CHF crosses.

Between July 2007 and March 2008, this pair fell from 2.5000 to 1.9375. That is a staggering 5600 + pips, a large move to any standard. In fact, it was the first time in more than 10 years, and only the second time in history, that this cross fell to 2.0000, a very important psychological level. As often happens in such furious, the price rebounded sharply from a low of about 2.0960 in March and has since settled into a sideways movement.

This action "true price" is a relative term and true in the light of recent months. Compared with other currency pairs, even daily moves are larger. Average True Range continues to show a reading of over 200, and 300 + pips days are the norm. Just last Thursday daily range was over 420 pips. Certainly this type of volatility demands respect and creates business opportunities.

The extreme price fluctuations may make it inappropriate for some operators. In addition, trade GBP-CHF in short periods of time could be an expensive proposition. The spread, the cost of trading is still relatively wide. Despite that in recent years to decrease extends remain less than 6 pips, with 8-10 pips still the norm. In common operations, including increased benefits potential can not compensate these costs.

Commerce longer periods may be a better proposal for most traders. The current low level of 1.9375 appears to be a major low, is likely to continue for the rest of this year. As a matter of fact, the patterns of long-term charts, weekly and monthly indicate that this is a multi-year low. In the long term up trend is expected for the rest of the year with a target of 2.1600-2.1800 for the coming months. After that would be the next target 2.3500 or even 2.3000, maybe a year later.

This type of long-term expectations should be reviewed and adjusted each few months. As of this writing, the price is around 2.0470, which provides an important opportunity for long-term negotiation. Due to the high volatility this pair, one should not use high leverage because it is almost certain to serious setbacks in time. While not suitable for everyone, GBP, CHF is undoubtedly a cross exciting, the value of a closer look.

About the Author

Mike P. Kulej is a Chief Forex Strategist for Spectrum Forex Llc. He specializes in mechanical trading systems as explained on www.spectrumforex.com . Spectrum Forex LLC offers numerous services to individual traders. With questions and comments e-mail him at kulej@spectrumforex.com.

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