- The US dollar has rallied slightly during the early hours on Friday as it looks like we are hanging around the 0.8750 level.
- This is an area that's been important multiple times, and it is probably worth noting that the 200 day EMA sits there as well.
- That being said, if we can break above the high from both Thursday and Wednesday, then I think the market can really start to take off to the upside.
Short-term pullbacks offer buying opportunities at this point as the 0.87 level would end up being support. But beyond that, we also have the 50-day EMA, which is sitting just above the crucial 0.86 level.
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If We Break Down from Here
Anything below there then changes the outlook for this USD/CHF market, but I think at this point, the market continues to look to the bond market to see whether or not interest rates pick up. If they do, then it should help the dollar against the Franc, which has a very low interest rate situation. That being said, I do think that the carry trade, and that's essentially what this is, will continue because the bond market, is causing rates to rise, but even if it didn't.
The interest rate differential between where the Federal Reserve is and the Swiss National Bank happens to be is about a mile wide. So, I think a longer term you will see this continue to at least attempt to break to the upside. Keep in mind, the Swiss franc is considered to be a very significant safety currency and probably one of the few in the world that might be considered to be safer than the greenback. So, this is actually going to end up eventually being a “risk on” trade. Because of this, I favor the upside, but also cannot ignore that swap at the end of every day that you get as well.
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