The US dollar has drifted back to the 50 Day EMA against the Franc early on Wednesday.
USD/CHF
The US dollar has fallen a bit during the trading session here on Wednesday to reach towards the 50-day EMA against the Swiss franc. This is a pair that I continue to like to the upside. I think it's going to take a certain amount of patience, but that's nothing new with this pair. This pair does tend to be very choppy and sideways for long periods of time, and quite frankly, that's part of why so many retail traders avoid it, ignoring the fact that you get paid at the end of every day to be long of the US dollar against the Swiss franc.
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The fundamentals certainly favor the US dollar over the longer term due to the growth rate in the United States far exceeding the European Union from a longer-term trajectory. And of course, Switzerland being surrounded by the European Union deals 85% of its exports into the EU. There is a very serious problem on the horizon, and that might be something akin to an energy crisis in the European Union. Energy is still not flowing through the Strait of Hormuz, and that could be a major problem for the EU that could have people running back to the Swiss franc, but more likely than not, will have them running to the dollar. The US has plenty of energy.
Technical Outlook and Interest Rate Differentials
So that is a longer-term outlook at this pair. But in the short term, I think it's just simply a matter of buying dips, collecting a little bit bigger position. The Swiss do not want a stronger franc anyway, so the risk of intervention is all but none. And we have the 50-day EMA offering support. It's going to be a slog higher, but I'm still looking for this pair to eventually make its way to the 0.85 level.
If we broke down below the 200-day EMA, just below the 0.80 level, then maybe I reassess some things. I think the real support beyond that is probably 0.78. I think that's going to be your floor. But as things stand right now, very loose central bank in Switzerland, and of course the Federal Reserve people are trying to guess that they're going to cut rates. We'll see if that actually happens, and even if it did, the interest rate differential still favors the United States by a country mile.
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