(MENAFN- Daily Forex)

• Sterling shows a short-term bounce against the franc, but broader weakness and overhead technical barriers keep the outlook cautious.
• A break above 1.0650 would shift momentum, while rallies below that zone still face selling pressure.

The British pound initially pulled back against the Swiss franc, but a certain amount of Swiss franc selling across the board has appeared. It is worth noting that the market is now trying to stay above the crucial 1.05 level. This is a large, psychologically significant figure and an area that offered a little bit of support from about a week and a half to two weeks ago.

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The question now is whether the pair can remain above this level. A nice hammer formed on Friday, making the market look a little exhausted. The factor that keeps this pair somewhat bearish is the general weakness of the British pound itself. The 50-day EMA sits just above the 1.06 level, acting more like a downtrend line. The 1.06 level had previously been massive support, and now that it has given way, it should carry a certain amount of market memory.

EURUSD Chart by TradingView

With this being the case, signs of exhaustion probably continue to get sold into. There is also the concern about the Swiss National Bank-not necessarily regarding this pair specifically, but the EUR/CHF pair. If the euro against the Swiss franc starts to fall apart, the Swiss National Bank will short its own currency, doing so across the board to keep the Forex markets under control.

There has been a bounce here, but it appears to be short term. The interest-rate differential definitely favors the British pound, but the real proof will be if the market can break above the 1.0650 level. That is possible, but there is work to be done before it happens. If that level is cleared, it could be the beginning of something significant. Until then, rallies have a lot of proving to do, and signs of exhaustion likely get sold into.

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