The US dollar continues to levitate a bit against the franc, despite some headwinds. Ultimately, this is a pair that pays you to hold it and therefore has a place in your portfolio.
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USD/CHF
The US dollar has been all over the place against the Swiss franc during trading on Monday, initially gapping higher, shooting towards the 0.78 level and then pulling back a bit.
Ultimately this is a market much like most others that is paying attention to the latest headlines and the latest noise coming out of Washington DC and Tehran because it has such an outsized influence on the bond market.
Interest Rate Differentials and Carry Trades
The interest rate differential continues to favor the US dollar and that is something that I plan on taking advantage of but you have to be somewhat careful here because the Swiss franc is also considered to be a safety currency and there is a little bit of a run towards that.
If we can break above the 0.78 level it opens up the possibility of a move to the 50-day EMA, possibly even the 0.79 level. The trade in the dollar against the franc isn't so much about nominal appreciation, it has a lot more to do with collecting swaps at the end of the day.
It's a carry trade. It's something that you just hang onto and pad your account with. I'm not looking for explosive moves to the upside, but I am looking for a gradual grind back to higher levels. If we fall from here, then the 0.77 level gets targeted possibly the 0.76 level.
I've got no interest in shorting this pair. I do not pay the swap at the end of every day, and I use it as almost something akin to a dividend stock in my currency portfolio.