- The U.S. dollar is consolidating near long-term support against the Swiss franc, with the Swiss National Bank likely defending key levels.
- The environment favors patient dip buying, range trading, and collecting daily carry while momentum remains muted.
The US dollar initially rallied during the trading session on Friday but gave back the gains pretty quickly. That being said, I think this is a market that's just bumping along the bottom here, as the 0.79 level continues to be massively supported. The 0.79 level is probably backed out by the Swiss National Bank. And the fact that they had recently suggested that they were watching the Forex markets closely does suggest that they are getting ready to intervene if needed.
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The thing about the Swiss National Bank, they are known to intervene quietly as well. They'll just defend a level and not make a big deal about it. They will occasionally jump into the market and cause chaos, but most of the time they tend to lie back. And you find out after the fact that there's a specific reason a specific level was held for what seemed like a lifetime. That might be what's going on here.
Range Trading and Quiet Central Bank Support
And while I don't necessarily think that we're in a major risk-on type of environment, I do like the US dollar, and you do get paid to hold this currency pair to the long side. With this, I think this is a nice accumulation pattern. I've been doing this most of the year, where I've been buying dips, hanging on to them, selling them when it rallies so that I get both the swap and the nominal gain. Let it fall a bit and then do it again.
And that's really what I'm doing here. The only catch is that you have to be able to be very patient. Sometimes it goes sideways and goes nowhere for a week or two. Again, though, you get paid at the end of every day. And that does add up over the months. It's been a substantial return for me this year. Not the bulk of my return, but it is almost like getting a free trade or two working out in your favor over the course of the last six months.
I'll continue to buy dips. If we break down below 0.78, then I think the Swiss National Bank will lose its sense of humor. If we could break above the 0.8150 level, then that would be a scenario where I would hold the US dollar. Right now, though, I don't think we have momentum. I just think we bounce around in this 200 pip range we've been in for what seems like a lifetime.
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