- USD/CHF continues to show firm buying interest, supported by SNB intervention threats and a strong defense of the 0.79 level.
- Markets now await the Fed decision and Powell’s tone, but the broader structure favors buying dips.
Another day has come and gone, and it looks like buyers for the US dollar continue to be a factor in this pair. It makes a lot of sense because the Swiss National Bank has recently suggested that they are going to intervene if the Swiss franc continues to strengthen, and since then, we've seen a bounce from the crucial 0.79 level, a little bit of a pullback, and now a continuation of the upside.
I anticipate that sooner or later this pair breaks above the crucial 0.81 level and starts to really challenge the 200-day EMA. That being said, there is a hiccup along the way that we have to watch. And that, of course, is going to be the Federal Reserve interest rate decision on Wednesday, and perhaps even more importantly, the FOMC press conference afterwards. After all, Jerome Powell has the ability to cause chaos if he doesn't say what the market wants to hear.
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Focus on Fed Tone and Market Positioning
While most market participants anticipate that we are, in fact, going to get a rate cut, the reality is that what they'll be paying the most attention to is going to be the tone of the press conference and, to a lesser extent, the statement. The market getting the interest rate cut is fine, but it's already positioned for that. The question at this point is, are the members of the Federal Reserve going to be aggressive in cutting? I don't think they are.
And I think the market's starting to sniff that out a little bit, and they certainly won't be as dovish as the Swiss. So, over the longer term, I do expect this market to continue to go higher as it's forming some type of an accumulation pattern for you Dow theorists out there, or maybe even a bit of a rounded bottom. We'll just have to wait and see. But at the end of the day, they both tell me the same thing. I like buying dips. I like getting paid at the end of every session, the swap that comes with this pair.
And I do think that we have essentially bottomed out because, quite frankly, the 0.79 level was guarded so well by support. I have the sneaking suspicion the Swiss were sitting underneath there. And once they get their mind to something, they tend to stick to it. So, I think we've bottomed. We'll have to wait and see. And even if we haven't, they will intervene, and that will make the bottom. I am a buyer on dips.
I like holding this pair; it does pay you to hold on to it. I've been doing that for a while and will continue to do so.
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