Signal:
- I am a buyer above 0.8140 with a stop loss at 0.7969 and a target of 0.8311.
- The US dollar has gapped lower against the franc to kick off the trading week, as tensions in the Middle East flared up a bit again over the weekend.
USD/CHF
The US dollar has gapped lower against the franc, rose pretty significantly to tag the 0.81 level, and then gave back those gains later in the day on Monday.
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Ultimately, this is a market that continues to see a massive yield differential as US yields continue to rise. That should be positive for the dollar against the franc overall, and if we can break above the 0.8140 level, at that point, I think momentum could pick up. It's worth noting that the Friday session saw a lot of upward trajectory as Kevin Warsh basically poured cold water on the idea of the Federal Reserve cutting rates anytime soon and even suggested that a hike was possible.
Interest Rate Differentials and Technical Outlook
With that being the case, this is a market that will remain one that I watch closely, and a move above the 0.81 level could be the beginning of that bigger move to 0.8140 and beyond. I am long of this pair, and I will remain long of this pair despite the fact that there have been a few sell-offs recently.
The interest rate situation just dictates that long is the only direction you can go, with the Federal Reserve likely to remain tight and the Swiss National Bank right at 0%. And I do think that the 0% interest rate situation is probably something that sticks with Switzerland for the foreseeable future. There have been no signs coming out of Switzerland that they are willing to change that, and therefore, I do favor the upside.
And I also am patient. I recognize that we will get the occasional wiggle, but that's what the swap is for: to pad from that type of volatility.
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