The US dollar has rallied significantly against the Swiss franc during trading on Tuesday to break back above the 50-day EMA again in a market that quite frankly I think continues to see a lot of interest rate differential being thrown into the mix.
After all, the US dollar offers quite a bit more in interest rate backing than the Swiss franc does. And of course, we recently, over the last 48 hours, have tested the crucial 0.78 level. The 0.78 level is a significant support level, and I do think it continues to play a part in this market.
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Interest Rate Differentials and Geopolitical Noise
Ultimately, I think we go looking at much higher levels, perhaps the 200-day EMA, but part of the problem we have right now is there's so much noise coming out of the Middle East that the market really doesn't know what to do.
As both countries look to be looking for an off-ramp to save face, I think there are going to be a lot of choppy and sideways movements in the currency markets, especially as both of these are considered to be safety currencies. It would make a certain amount of sense that perhaps we grind.
That being said, you get paid at the end of every day to hold US dollars against the Swiss franc and it's hard to ignore that. I think eventually that comes into the picture and people start to pay close attention, perhaps driving this pair to the 0.80 level. It's not going to be easy to get there though.
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