The US dollar finds itself sitting at a large round psychologically significant figure against the Swiss franc as we trade on Thursday, which does make a certain amount of sense considering that there's a lot of confusion out there.
Quite frankly, the US dollar will be driven mainly by yields, and this pair could be driven by yield differential as well.
Currently I'm watching the 4.30 level in the US 10-year and that level, I think if we can sustain a move above there, will push money back into the US dollar and away from the zero-bound Swiss franc. The 50-day EMA sits in this neighborhood as well, so I do think it's a potential buying opportunity, but we need to see a bit of a bounce so we can buy the right-hand side of the V if you will.
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External Influences and Peace Talks
If we break down below the 50-day EMA, then we could see this market drop to the 0.78 region where we had seen quite a bit of action previously. We are in the midst of trying to sort out where to go next and I do think you have to keep in mind that the markets will continue to be heavily influenced by random headlines coming out of the Middle East and of course what happens with the peace talks.
The peace talks of course have a pretty significant outsized effect on how rates move and at this point I do think we are doing everything we can to turn things around and start rallying again. I suspect that's probably bad news, not good news, despite the fact that most people consider the Swiss franc to be a safety currency.
The reality is recently that's not how the USD/CHF pair has been acting because of the interest rate differential. You do get paid to hang onto this pair so it does soften the blow a bit if you do get a drawdown and go long. The market is a slow-moving one most of the time, keep that in mind, but I do think that there's a potential opportunity.
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