The US dollar continues to rise against the Franc on Wednesday as the Swiss National Bank is trying to turn things around.
USD/CHF
The US dollar has been under assault by multiple currencies around the world over the last couple of weeks, but it is starting to show signs of life. This is true against the Swiss franc as well, and this pair always captures my attention because if you want to play the carry trade, you can buy the US dollar and short the Swiss franc in an environment that typically doesn't run too hot or wild.
Furthermore, you also have a central bank in Switzerland that is looking to weaken its own currency, so I think you have a situation where you could look to this to collect swap at the end of every day. That being said, I did spend quite a bit of time earlier this year trading the range and eventually got stopped out after buying the dollar multiple times against the Swiss franc and collecting the swap.
Potential Central Bank Intervention
With this being said, I think we are in the midst of trying to bottom out, and certainly the Swiss will be paying close attention because if the Swiss franc continues to strengthen the way it has against not only the dollar but multiple other currencies, we have a situation where they almost certainly will do something to intervene and drive the price higher.
At this point, I think we are trying to get to the 0.79 level where the 50-day EMA currently resides, and I do think it causes a bit of resistance. If we can get above there, that would be a very bullish sign for the US dollar, but this pair more likely than not is going to move in the same direction as the US dollar moves against almost everything else.
So with that, pay attention to other pairs also and recognize that while we don't know where the floor is in this pair, the reality is you could wake up one day if it starts to sell off too drastically to see this pair up 400 pips pretty quickly because the Swiss are not only known for intervening, but they're quite vicious.
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