- The USD/CHF pair has recently seen a lot of noisy trading, but in the end, the Swiss National Bank could be the story.
The US dollar has struggled against the Swiss franc for about a week now, but the trading session on Wednesday and now the trading session on Thursday both show signs of an attempt at bouncing.
This does make a certain amount of sense considering that the Swiss National Bank has made it implicitly clear that they are not amused by an overvalued Swiss franc currency. As a result, they could possibly intervene. Quite frankly, this is something that the Swiss have done quite a few times in the past anyways, so this is one of those central banks you have to pay attention to and take threats of intervention very seriously.
With that being the case, when I look at this chart, I do think that a bounce is somewhat imminent and probably ties in with the US dollar against the Japanese yen as well. In other words, people going back to the carry trade.
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A rally from here would almost certainly see some type of reaction at 0.78 and most notably at 0.79, which was the previous support barrier. The US dollar falling from here could open up a move down to the 0.76 handle, which in and of itself is not necessarily a massive concern for the Swiss, but if the Swiss franc starts to really appreciate against the Euro, then you might see coordinated intervention.
So, with that being the case, I am interested in going long here. If the US dollar starts to recover, this might be one of the best places to trade it because it has a central bank working against its own currency. Given enough time, I do think that we will recover; the question of course is from where. Right now, it looks like we are at least trying to find some type of floor.
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