Potential signal:
- I bought this pair at 0.7945 with a stop loss at 0.7885 and a target of 0.8050 above.
- USD/CHF remains range-bound near key support as traders watch for a bounce, with Swiss National Bank intervention risk and rate differentials favoring the U.S. dollar over time despite recent dollar weakness.
The US dollar remains very noisy against the Swiss franc, but I think this is an area that a lot of people will be watching as we have been consolidating since July, with the 0.79 level offering support and the 0.8150 level offering resistance. Now that we are fairly close to the 0.79 level, it is worth watching this pair because if we get a little bit of a bounce, it might be an easy way to pick up 100 pips or so.
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With that being the case, keep in mind that this is a slow-moving pair in general, and as a result, you do have to be somewhat patient. Given enough time, though, I think you also have to realize that one of the biggest drivers of this pair is probably the Swiss National Bank.
Swiss National Bank Intervention Risk
Keep in mind that the Swiss National Bank has explicitly stated that it is looking to intervene in markets if things get out of control, or in other words, if the Swiss franc strengthens too much. I do believe that out of all of the central banks around the world, it's the Swiss National Bank that you have to be the most concerned about as far as intervention is concerned. They have shown multiple times in the past that they have no qualms whatsoever in doing that.
And with that being the case, and the fact that you have the interest rate differential favoring the US dollar, I think it makes a lot of sense that we do recover, given enough time. The US dollar is going through a little bit of a pullback as of late, but I do recognize that this is a pair that operates a little differently than many others.
Longer term, I do anticipate that the dollar will break out to the upside, and certainly the Swiss won't be upset about that. So, with all of that being said, I think buying this dip may very well be the next move I make.
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