- USD/CHF reversed early weakness and is pressing resistance near 0.81, with traders watching 0.8150 and the 200-day EMA for a breakout.
- FOMC messaging and Swiss National Bank intervention remain central to the pair’s long-term direction.
The US dollar initially fell during trading on Wednesday, only to turn around and show signs of strength against the Swiss franc. At this point, it looks like the US dollar is trying to threaten a breakout above the 0.81 level. That area has, of course, been an area that has been important area and offers a lot of selling pressure. But if we can break above the 0.8150 level, it's likely that we could go to the upside. Short-term pullbacks, I think, are very likely, and most certainly, the FOMC meeting on Wednesday will have a major influence on what happens next.
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I don't think it's the interest rate differential shrinking slightly that changes things because, quite frankly, you still get paid to hang on to US dollars in lieu of Swiss francs. It'll be the statement coming out of the Federal Reserve because if Jerome Powell ends up being somewhat noncommittal to further rate cuts, I think this is probably the final blow to resistance here. And we go to the upside. This is mainly due to the Swiss National Bank in their desire to keep the value of the Swiss franc low and, therefore, willing to get into the currency markets and start shorting the franc if it gets too strong. They have made several statements as of late about their desire to keep things under control and that they have been monitoring the FX markets in general.
SNB Influence and Breakout Potential
Because of this, I think you have a situation where it is only a matter of time before traders start to look at this as a potential breakout and bottoming pattern. And if we can break above the 0.8150 level and then the 200-day EMA, which is just 35 points above there, then we could really take off to the upside for a nice long-term buy and hold scenario. At this juncture, I have no interest in shorting this pair because the Swiss National Bank will prevent it from falling too far. But if I wanted to short the US dollar, I would do it against other currencies. The Swiss are most certainly active in this market, as the 0.79 level has been like a brick wall.
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