The euro continues to see strength against the Swiss franc longer-term, as we are rebounding from the losses yesterday. At this point, interest rates continue to be the driver.
EUR/CHF
The euro has rallied a bit during the trading session here on Friday, as the interest rate differential is starting to focus the market on buying the euro.
German yields are, of course, much higher than Swiss yields, as Germany offers 3.35% on the 10-year yield. The Swiss, on the other hand, are keeping their interest rates as close to zero as possible, so you do get paid to hold this pair.
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The question is, can we take out the 0.93 level?
That is where the 200-day EMA currently resides. Breaking above that would be a significant bullish sign. A move at that point could send this market looking to get back to the 0.95 level.
If we continue to fall from here, then I wash my hands of this pair. I will not be involved in it. I actually look at this as a one-way trade. I like the idea of collecting swap at the end of every day.
The Swiss franc is weakening against multiple currencies during the trading session, so it looks like traders are trying to come back to the interest rate differential story, and that could send the euro higher.
Both of these economies are going to have to worry about the problems facing them in the winter when it comes to energy, so this might be the one place where that does not really come into play. Germany, of course, has a larger industrial base, but still, the question will be what happens with the bond markets here.
I do think eventually, if we can take out this 200-day EMA and the 0.93 level, it does offer a potential move to the upside.
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