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The Pound's uptrend against the Swiss Franc has more to give, according to Bank of America, which says both its quantitative signals and the charts point higher.
The call comes in the bank's latest FX strategy update, released after Pound-Franc broke above a key technical level on 08 July.
"Option flow, skew, and cross-asset signals have all turned meaningfully GBP-positive while a bullish continuation signal, supported by a constructive ADX trend, suggests the GBPCHF uptrend has further to run," says Bank of America.
"Keep Calm and Carry On"
Strategists at the bank flag Pound-Franc as an attractive pair for benefiting from carry as volatility grinds lower through the summer.
The carry trade involves borrowing or selling a currency with a low interest rate to hold one offering a higher rate, with the trader pocketing the difference between the two.
Pound-Franc suits the strategy because UK interest rates sit well above Switzerland's, and the trade works best when exchange rates are calm; quiet markets reduce the risk that adverse currency moves wipe out the interest income.
This week's quant signals reinforce that view, with the bank noting that "no major G10 cross offers higher vol-adjusted carry."
Fundamentals are said to support further upside in the cross too.
"Tech- and AI-related M&A flows should keep GBP supported near-term," says Bank of America.
On the other side of the pair, the Swiss National Bank's "increased willingness" to intervene in FX markets should limit Franc appreciation, according to the bank.
The Chart Agrees
Bank of America's technical strategists had said a close above 1.0798 would confirm a head-and-shoulders bottom pattern, a formation that typically marks the end of a downtrend.
That level gave way on 08 July, prompting the bank to reiterate targets at 1.0961 and 1.1112, with 1.1306 possible beyond.
Momentum indicators are supportive of the move.
The 50-day moving average crossed above the 200-day average on 24 June, a so-called golden cross that signals an uptrend bias.
"The RSI trending higher above 65 suggests bulls are in control," says the bank, which also points to rising upside pressure in directional movement indicators since mid-June and a strengthening trend reading from the ADX.
What Would Void the View
Bank of America says any retracement should ideally hold the daily moving averages and lower Bollinger Band, now in the 1.0632 to 1.0603 zone.
"A close below the proposed right-shoulder low at 1.0474 likely voids the bottom pattern," warns the bank.
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