- The U.S. dollar slid early against the Swiss franc before recovering, with traders eyeing resistance near 0.81 and the 200-day EMA above it.
- Interest-rate differentials and SNB’s anti-franc stance support a cautiously optimistic, dip-buying outlook.
The US dollar initially dropped against the Swiss franc, but has seen the market turn back around and show signs of life. Ultimately, this is a market that's still in the process of turning things around and rallying. The 0.81 level above is a significant barrier that I think a lot of people are going to be trying to get above. If we can break above there, then the 200-day EMA comes into the picture at 0.8183.
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Interest-Rate Dynamics and SNB Positioning
But I think overall, this is a scenario where you're just buying dips because you get paid to hang on to this position as the interest rate differential favors the US dollar, even though people are anticipating interest rate cuts coming from the Federal Reserve, the first one of course in the next string of them on Wednesday. Whether or not that actually ends up being true remains to be seen, and of course, a lot of people will be watching the press conference and the statement for hints as to where we go next.
With that being the case, I think you have to be cautiously optimistic because on the other side of this equation, you have the Swiss National Bank, which is definitely going to try to drive down the value of the Swiss franc. It has been stated multiple times recently that it does not like the appreciation of the Swiss franc, and it will be watching the Forex markets, which of course is code for they will intervene if the Swiss franc continues to strengthen. With all of that going on at the same time, I think we're in the midst of forming a rounded bottom, and I do think that it is probably only a matter of time before we break out.
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