The U.S. dollar has taken off against the lowly Swiss franc on Tuesday, as the interest rate play continues to get traders involved to the upside.
USD/CHF
The U.S. dollar initially pulled back a bit against the Swiss franc during the trading session on Tuesday, but then turned to the upside as CPI just reaffirmed the fact that there is going to be a firmer Federal Reserve at the moment. Carry traders are starting to jump in to take advantage of the fact that the Swiss National Bank is committed to a 0% interest rate policy. As long as that's the case, then you will see dollar positions pay you on top of that Swiss franc.
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Buying dips will likely remain the norm
I think ultimately this is a market that will continue to see a lot of buy-the-dip behavior. I also think that the 0.8150 level has proven itself to be significant support. The question now is how much momentum can we pick up? Generally speaking, this is not a very quick-moving pair, but I am looking for this market to try to get to the 0.84 level.
Remember, the Swiss not only have a 0% interest rate policy, but they also have to worry about energy this winter as well. It is the same thing as the European Union. Therefore, I think you will continue to see U.S. dollar strength, especially as the U.S. economy is showing no signs whatsoever of slowing down with any significance.
In fact, last week we had the jobs number come out at almost triple expectations. With that being the case, the Federal Reserve is likely to raise rates in December and possibly even in March of next year. Based on the Fed tool, that makes sense. You get paid to hold this pair to the upside. So, unless something changes rather dramatically, the recent action that we had seen over the last couple of months was just a simple and gentle pullback.
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