The euro rallied against the Swiss franc on Friday, as traders continue to test the crucial 200 Day EMA. This pair continues to pay attention to risk appetite, and the interest rate differential.
The euro has risen during trading on Friday, bouncing from the 0.92 level, an area that obviously has attracted some attention in the past. But now, later in the day, we find ourselves pressing the 200-day EMA, an area that probably would cause some issues. All things being equal, the interest rate differential does favor the euro over the Swiss franc, and overall, I think that is the main driver here after all the ECB raised rates just yesterday, but it doesn't look like they're going to be raising them aggressively.
A Potential Bullish Run
Ultimately, I do think given enough time, this is a market that if we can break above the 200-day EMA on a daily close, it could set up a potential breakout. That breakout could send the euro all the way to the 0.94 level. This is a “best-case scenario” at the moment for me.
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The 0.92 level for me is immediate support, followed by the 50-day EMA and basically 0.9180. The Swiss National Bank, of course, is pretty aggressive with the idea of intervening if the franc gets to be a little too strong in general. After all, the Swiss exports, 85 % of them, tend to end up in the European Union. So, this is a major problem for Switzerland.
If the Franc gets to be too strong, all things being equal, if we can continue to see the interest rate differential play out in the form of a type of carry trade, I do think that this market goes much higher. I have no interest in shorting anytime soon.
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