- The USD/CHF has rallied again during the trading session on Tuesday, as we continue to see it destroy almost everything it meets.
- The Swiss franc of course has to deal with lower interest rates coming out of that country, while the Federal Reserve continues to be very tight with his monetary policy.
- We cleared the 200-day EMA a while ago, and it suggests that we are getting ready to go much higher.
Any pullback at this point in time will see the 200-Day EMA as a potential support level, and the fact that the 0.90 level also offers an area where you would see a lot of support as it is a large, round, psychologically significant figure, and it does it just below the 200-Day EMA. The 50-Day EMA sits underneath there and is rising as well, so I do think that given enough time it’s likely that we will continue to see buyers in that general vicinity. Ultimately, this is a freight train that continues to go higher in the longer term. Because of this, look at short-term pullbacks as buying opportunities to pick up “cheap US dollars”, which is the way to trade the markets right now in general.
We Go All the Way to the Parity Level
All things being equal, the US dollar will continue to be a juggernaut, and as there are a lot of concerns about the global economy, then the traders around the world tend to run to the US dollar for safety. True, the Swiss franc also is often thought of as a safety currency, but at this point, it’s obvious that the interest rate differential is also what people are paying attention to. After all, there’s no point in going into riskier investments when you can simply sit and collect 5% on a bond in the United States. I think that continue to try this market and I do believe that we go to the 0.94 level given enough time. Ultimately, I think we even go all the way to the parity level, but that’s a longer-term call and of course, you must be very patient to see that. The pair pays you to hang onto it at the end of the day as the swap is wide enough to keep people hanging on.
Potential Signal: The US dollar continues to be a huge winner around the world, and I think the action on Tuesday just shows even more of this. I am a buyer of this pair and have been hanging on for a couple of months now, and I think at this point fresh longs can be added. A stoploss at the 200-Day EMA makes sense, with an eventual target of 1.00 above.
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