Potential signal:
- A potential short-term trade, buying here, aiming for 0.80, stop loss 0.7890
- The 0.79 level has been like a cement floor in the market since the beginning of July.
On Monday, the US dollar has drifted a little bit lower against the Swiss franc in early trading. That being said, we are near a major support level, and therefore, I will be looking for a short-term bounce to trade off of.
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The 0.79 level has been like a cement floor in the market since the beginning of July, and it is worth noting that the Swiss National Bank has made a few comments about watching the forex markets for irrational moves. In other words, they are starting to lose their sense of humor with the idea of the strengthening Swiss franc.
That being said, it is not really the US dollar that they are concerned about, as they would be the Euro, for example, and that being the case, you have to be cognizant of the fact that although it looks like we have a pretty significant floor here, this isn't what might necessarily trigger intervention. That would be the Euro against the Swiss franc.
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Nonetheless, the US dollar is an important exchange rate for the Swiss franc because it represents money flowing out of Switzerland into almost every other country in the world, so it's not as if they don't pay attention here; it's just that it's typically not the trigger.
With all things being equal, it is worth noting that the 0.79 level has held like a brick wall, and the Swiss National Bank has been known to intervene very quietly in the markets as well, so this would not be out of their wheelhouse.
With all of that in mind, I am looking to buy a bounce, and it would not surprise me to see this pair run to the 0.80 level, possibly even 0.81. You are talking about a time of year that typically has a lot less liquidity, though, and can either move very slowly or very erratically. I have seen both, depending on what traders find themselves doing at the end of the year.
Are they squaring up positions and everybody has leaned in one direction, or are they fairly neutral? In this pair, we have been fairly neutral for five months, so I don't expect erratic moves as we head into the holidays. I anticipate just a short-term scalping environment.
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