Although the USD/CHF pair is somewhat quiet at the moment, there is still a significant amount of support below in this pair.
USD/CHF
The US dollar is somewhat quiet against the Swiss franc during the trading session on Monday, as the Americans are away for Labor Day. This is a pair that is fighting between two competing themes.
The dollar still has support from renewed Fed hike speculation following the stronger US employment backdrop, while the franc has received a little bit of a boost late last week, as Swiss inflation firmed enough to raise speculation that the Swiss National Bank could eventually move away from a zero-rate posture.
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That leaves the US dollar against the Swiss franc currency pair lacking a little bit of a clean directional catalyst in the short term.
The rate differential remains heavily in the dollar's favor
The rate differential remains heavily in the dollar's favor, and current policy rate indications are roughly 3.75% in the United States versus zero in Switzerland.
However, the Swiss franc's safe-haven characteristics and emerging Swiss National Bank tightening speculation make it difficult to treat the carry differential alone as a sufficient reason to buy this pair.
From a technical analysis standpoint, it is still bullish, and I still feel as if short-term dips are buying opportunities. That being said, the competing fundamental themes make it likely that the pair remains choppy in the immediate term, with a certain amount of carry trading still going on out there.
The upcoming catalysts remain the US PPI on Thursday, the US CPI on Friday, and, of course, the Federal Reserve interest rate decision next week.
In the short term, my bias is neutral with a slightly bullish lean. The technical structure still favors the upside, but the lack of a clean directional catalyst suggests that any move higher could remain uneven until the upcoming US data and Federal Reserve decision provide more clarity.
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