- Right now, this is a pair that I'm paying close attention to due to the fact that it is at such high levels.
- In fact, the 115 level is an area that I am paying quite a bit of attention to because if we can break above this area, it's likely this pair truly starts to take off and at this point, it would become more or less buy and hold.
- This would be a huge “shot across the bow” as it were.
It does make a certain amount of sense that we would see that mainly due to the fact that the British interest rates are so much higher than the Swiss interest rates, and of course, Switzerland just cut. So, they were the first bank to do it, and therefore, they will be the first currency truly punished. The 50-day EMA crossed above the 200-day EMA a couple of weeks ago, kicking off the Golden Cross, so it is a longer-term buying hold signal. This is a signal that I am not necessarily a huge trader of, but it is one that a lot of people pay close attention to.
Buying on the Dips
So as things stand right now, what I think is likely to happen is every pullback gets bought into. Again, the 1.15 level is an area that I'll be paying close attention to. If we can break above there, then we can really take off. On the other hand, if we pull back, I suspect somewhere near 1.13, we should have plenty of support.
Keep in mind that the Swiss franc is going to be punished across all pairs and you see it against the dollar, even the Canadian dollar, several others. And I think this is just a pattern that quite frankly, you can repeat for months, just shorting the Swiss franc. At the same time, the Japanese have raised interest rates, granted only to 0.1%, but it does show a divergence between the two central banks. So, with that being the case, I think the Swiss franc is now your funding currency for most carry trades.
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