According to market commentary from the firm's strategists

  • GBP is poised to "regain some lost ground"
  • Market is running out of reasons to drive it much lower
  • Key negative factors such as patchy economic data, weaker expectations of monetary tightening, and Brexit uncertainty have all been priced in
  • Recommends buying sterling against the swissie
  • SNB's "aggressive policy mix of negative rates and currency intervention" is likely to prevent further gains in the swissie - even if markets get jittery again
  • Long-term valuation model suggest fair value for GBP/CHF is 1.40
  • Recommends going long at 1.3150, with a target of 1.3850 - stop loss at 1.2780

Now we have the fundamentals out of the way, let's try and dissect current levels in the pair and the trade recommendation.

Looking at the daily chart, the pair looks to have found support at the 76.4 retracement level @ 1.3101 during the recent downside move and now looks to climb back above the 200-day MA (blue line). A break above the latter will at least give buyers a good platform to build on as they break the bearish sentiment that sellers gained during the downtrend from April.

The hourly chart also shows that price is trading above both the 100 and 200-hour MAs, which bodes well for near-term bullish sentiment and that will be key to watch until buyers can make a further run to the upside to break the 100-day MA (red line).

Key downside support right now sits at the 76.4 retracement level and the lows there so those will be areas to limit risk in my view. And a break of the 200-day MA is a good sign that the pair may see a rebound but I'd watch for a break of the 61.8 retracement level to be sure of any further upside in the pair.

The swissie has been holding up relatively well in the last few weeks as USD/CHF looks to be unable to hold a break above parity. But in the bigger picture where things are "normal" the trade in GBP/CHF would be a battle of who is weaker with the GBP having Brexit risks and economic growth worries weighing, while the CHF having the SNB continuing to prefer a weaker currency.

The slight edge that sterling has right now would be that the BOE is a couple of steps ahead of the SNB in the tightening stance with regards to monetary policy.