The US dollar continues to offer a bit of an interest rate differential, as the franc remains on its back foot.
USD/CHF
The U.S. dollar has shown itself to be a little bit noisy during the early part of the trading session here against the Swiss franc on Monday, as the 50-day EMA is coming into the picture to offer a little bit of support.
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If the market were to bounce from here, then it could open up a much bigger move to the upside, perhaps to the top of the range that we had been in for a while. When I look at this pair, one thing that I am going to be keeping an eye on is the stochastic oscillator. It is worth noting that we are crossing at the oversold area with the moving averages, and that could be a signal to start buying. We will just have to wait and see.
Interest rates continue to be a big part of this market
Ultimately, though, this is a pair that I like buying anyway because of the interest rate differential. I have been long this pair for quite some time, and now the question is: do I add to that position a small increment? Yes, I think that would be the case in my particular situation.
As I do look for the U.S. dollar to continue appreciating against the Swiss franc, it is kind of a strange pair right now because the Swiss National Bank is hell-bent on keeping a zero-interest-rate policy. However, the Swiss franc’s safe-haven appeal appears to be weakening, while the significant interest rate differential between the US and Switzerland continues to favor the US dollar.
If we get more of a risk-on type of situation, that also takes away from the Swiss franc, so it is almost a heads-I-win, tails-you-lose type of situation. We will just have to wait and see. I have no interest in shorting this pair. I am going to be adding a little bit more today, looking to reach 0.84, possibly 0.86, by the time it is all said and done.
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