The US dollar rallied on Tuesday but gave back a lot of gains once we broke above the crucial 0.80 level. This is also where the crucial 200 Day EMA sits.
USD/CHF
The US dollar rallied quite a bit during the trading session on Tuesday but gave back a lot of gains once we broke above the crucial 0.80 level and by extension the 200-day EMA.
This is a market that I've been talking about for some time. It's been a nice way to collect swap. We did turn around enough to have me think that maybe a pullback is imminent. And quite frankly, that would make a certain amount of sense considering that we have been straight up in the air.
Interest Rate Differentials and Central Bank Intervention
If we were to break above the high of the trading session on Tuesday, then I think it opens up the possibility of a move to the 0.81 level. I think at this point any pullback does end up being a buying opportunity because even if the rates in America do drop the reality is that it won't be enough to make the interest rate differential appealing to have people willing to short the dollar into the Swiss franc.
Furthermore, we also have the Swiss National Bank actively jawboning the value of the Swiss franc down letting the markets know that they will have no qualms whatsoever to start intervening.
So, I think you have to look at this through the prism of a market that is just simply trying to figure out where to go next and, in this environment, I like the idea of taking advantage of little bits and pieces of value as they occur. I don't have any interest in shorting, and fighting the Swiss National Bank.