The US dollar has rallied against most currencies on Tuesday, as we continue to see a lot of concerns out there about the war, and of course any knock-on effects.
USD/CHF
The US dollar has rallied rather significantly against the Swiss franc during trading on Tuesday as we threatened the 0.79 level but could not hang on to the gain that was made. Ultimately, we are hanging around the 50-day EMA which of course is an indicator that a lot of people pay close attention to.
If we were to turn around and fall from here it could send the dollar back down to the 0.77 level and I do think that the 0.78 level remains a bit of a fulcrum for price. The interest rate differential pays you at the end of every day to be long of the US dollar against the Swiss franc and I did find it interesting that earlier in the day we had seen the US dollar strengthen against the Swiss franc despite the fact that there are a lot of concerns about the war in the Middle East.
Geopolitical Resilience and Interest Rate Differentials
At this point in time, I find it very interesting that the Swiss franc didn't strengthen the way it typically would do in the past. As long as the war doesn't expand it's possible that we may continue to see the status quo, but I'd be watching the US dollar in general because if it does break above the 0.79 level that would be yet another barrier that it broke.
The question now is whether or not we can get any type of momentum. With that being the case diligence and perhaps risk management will be crucial here with this pair possibly being backed up by the Swiss National Bank as well. I just don't like the idea of shorting this pair in this environment and I do think that eventually things turn around but as things stand right now, I think you could probably count on a lot of massive swings in both directions.
Potential signal: I am a buyer of this pair if it breaks above the 0.79 level, with a stop at the 0.78 level, and keep it as “buy and hold” for the moment.