The US dollar continues to go back and forth against the Swiss franc on Tuesday, as we are looking at a mix of major interest rate differentials and safe-haven noise moving things.
USD/CHF
It's been pretty noisy in this pair during the trading session here on Tuesday, and the 0.81 level continues to be important. It's more or less a fulcrum for price.
The US dollar is getting a little bit of a boost as Treasury yields remain pretty high, with the 10-year right at 4.79%. Last Friday's strong employment numbers have certainly raised the probability of a September Fed rate hike to roughly 60%.
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There is a little bit of a headwind, though. The broader dollar index has struggled below 99, and that's partly because traders are cutting dollar longs ahead of inflation data.
We get PPI on Thursday and CPI on Friday in America.
This gives the franc some fundamental support beyond simply being a safe haven
Switzerland is getting a little bit of classic safe-haven demand from the deterioration in Middle Eastern conditions. This is a market that remains noisy to say the least.
Also, there were stronger-than-anticipated Swiss inflation numbers coming out of Switzerland here recently, as well as stronger-than-anticipated Q2 GDP numbers. This gives the franc some fundamental support beyond simply being a safe haven.
Ultimately, though, with the Fed having an interest rate band of 3.5% to 3.75% and possibly another rate hike coming, with the Swiss National Bank at 0% and a 97% probability of no change on September 24th, normally that's a strong argument for the upside. But Switzerland is getting a little bit of help from the chaos.
That being said, I still like buying short-term pullbacks. I do think that the 0.80 level, backed up by the 200-day EMA, ends up being the floor, at least in the meantime.
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