The USD/CHF pair initially fell during the session on Tuesday but found enough support at the 0.98 level to turn things back around until very strong candle by the time the markets closed. With this, it appears that the US dollar will continue to strengthen against the Swiss franc, which of course isn’t much of a surprise at this point in time. The Swiss National Bank has been working against the value of its currency for some time now, albeit in the EUR/CHF pair. Nonetheless, even if it’s not in this pair directly, it does have a bit of a knock on effect over here.
Adding to that the fact that the Federal Reserve is looking to raise interest rates sometime this year, it makes sense that people will prefer to have dollar-denominated assets. In order to have those dollar-denominated assets, they have to have US dollars. It isn’t necessarily that Switzerland itself is being shunned, but we do have to keep in mind that the Swiss are beholden to their largest customers, the European Union. While Europe does seem to be getting better, the truth is that it’s a long way away from being completely healthy.
Buying pullbacks
At this point in time, I am buying pullbacks in this market. I believe we eventually go much higher, probably heading to the parity level first. After that, I believe that we go even higher than that and we are starting to see the beginning of a multi-year trend in this pair possibly. It really comes down to what the SNB does, because quite frankly the Swiss are small enough that they can manipulate their currency quite well. After all, you have to keep in mind that the Swiss managed to keep the EUR/CHF pair pegged to the 1.20 level for 4 years. That’s no small feat, and as a result it shows just how much resiliency the Swiss are willing to exhibit. However, I think at this point in time, the Federal Reserve isn't even worried about the Swiss franc, the truth of the matter is that it does almost nothing as far as US trade is concerned.
