Potential signal:
- If you haven’t bought already, this is a pair that offers an opportunity over the longer-term.
- I would have a stop at 0.79 and a target of 0.8250. Patience will be needed.
- The US dollar has jumped against the Swiss franc on Wednesday, as traders continue to see interest rates driving the USD higher.
- At the end of the day, people are now betting on further interest rate hikes coming from the USA.
The US dollar initially pulled back just a touch during the trading session on Wednesday but has turned around to show signs of strength against the Swiss franc as traders are now betting that the Federal Reserve will be forced to raise rates later.
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With this, it looks likely that we can continue to see a lot of US dollar strength, and of course, the Swiss franc will continue to be a victim of the US dollar as the interest rate differential makes such a huge difference. With this being the case, I think you have a scenario where traders will continue to look at this as a market that will eventually break much higher, and I do believe that we have a situation where every time the US dollar dips, traders will have to look at this very seriously as a potential longer-term buy-and-hold situation as well.
Interest Rate Differentials and Bullish Momentum
With this, I think you have to be very bullish and, at this point in time, unless something changes quite drastically with the overall attitude of markets and, of course, the bond market, I believe that it is probably only a matter of time before we break out well above the 0.81 level, although that will take a certain amount of time.
The 0.79 level underneath should be supported by the 50-day EMA underneath, offering support as well. All things being equal, this is a very strong candlestick, and unless things change rapidly, I think this is, in fact, a currency pair that you have to watch very closely.
Longer term, this could end up being a nice investment based on the carry trade, which, as far as I can see it looks like it's going to continue
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