Potential signal
I am a buyer (adding to existing position) here, with a stop at 0.8050 and a target of 0.8490 for this part.
The U.S. dollar continues to grind back and forth against the Swiss franc on Friday, as we digest the latest big move in this pair. The carry trade is alive and well in this pair, and it is one that I am in.
The U.S. dollar continues to consolidate against the Swiss franc after that move post-FOMC meeting on Wednesday. As market participants are simply digesting some of the momentum that came into play here, the 0.82 level, at least for me, continues to be an area of support and is worth paying attention to, as it was a previous swing high.
The interest rate differential favors the US dollar
The interest rate differential favors the U.S. dollar and has only expanded in the last couple of days, so I still remain long in this market and have no interest in buying the Swiss franc. While I understand that sometimes the Swiss franc gets a little bit of a boost due to fear in the markets, the interest rate differential is so large that there's only one way I can trade this market, and I take advantage of dips as they occur.
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It's possibly worth noting that the stochastic oscillator is currently in the oversold position and crossing, so that could set up for a little bit of a pullback. Ultimately, I believe that pullback continues to be a buying opportunity, as the Swiss National Bank has reiterated its desire to have zero interest rates.
While there are concerns about inflation slipping into Switzerland because of a lack of energy on the continent, the overall picture here is still very bullish. I still like the idea of going long, and I still believe that we could probably go as high as 0.86 over the next several months.
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