The US dollar plunged at the open on Wednesday, as the ceasefire in the Middle East caused interest rates in the US to drop rapidly.
USD/CHF
The US dollar plunged against the Swiss franc during trading on Wednesday as the ceasefire was announced. That makes quite a bit of sense that we would see this market drop because interest rates in the United States fell as well.
With that being the case, the interest rate differential wasn't as wide as we had seen previously, so it does make a certain amount of sense that the Swiss franc would be at least getting a bit of a breather.
But when you look at the overall situation, this is a market that has been very difficult to hang on to, but it's also been a massive winner for me for some time. This pullback that ended up being so ugly, I think ends up being an opportunity to get long.
Interest Rate Differentials
Quite frankly, even if I am wrong here, there are plenty of reasons to believe that the Swiss franc is somewhat limited in its strength due to the fact that the Swiss National Bank has no interest whatsoever in seeing a stronger Swiss franc. Eventually, you would have the traditional role of the Swiss franc being a safety currency go away as well.
If we can get any type of good news coming out of the Middle East from a longer-term standpoint, that might be enough to push traders back into the market. The interest rate differential is wide enough to drive a truck through, as the Swiss stay near 0% and the Americans are teetering around the 4.3% on the 10-year.
The swap of course is ultimately what I think drives this market longer term, and it is worth noting that we failed at the 200-day EMA but also bounced at the 50-day EMA. Therefore, I’m interested in having a go at this pair because if it does break out above the 0.81 level, we could be looking at a move to the 0.88 level before it’s all said and done and got paid at the end of every session.
Potential signal: I am buying right here. I have a stop at 0.7830 and a target of 0.81 where I will move stop loss to break even. Then, I will look for a few hundred pips.