- It's obvious to me that there are plenty of buyers out there.
- All things being equal, short-term pullbacks will more likely than not continue to attract value hunters due to the fact that the US dollar has shown itself to be so resilient.
We are in the midst of a double bottom forming near the 0.8850 level. If we can break above the 0.89 level, then I think the market probably goes looking to the 0.90 level. The 200 day EMA is sitting right around the 0.8950 level. On the other hand, if we were to break down below the 0.88 level, then I think the US dollar really starts to break down.
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All things being equal, this is a market that I think continues to be very noisy, but the interest rate differential does pay you to hold this pair in dollars. Don't get me wrong, I don't necessarily think this is a massive shot higher just waiting to happen in the short term, but I do think we are in the midst of a bounce. Keep in mind that the Swiss franc is suffering at the hands of the Swiss national bank cutting rates recently, and now it looks like the Federal Reserve may not? Actually, between now and the end of the year, that's still a completely open question as inflation seems to be extraordinarily sticky. Even if they did cut 25 basis points, then the interest rate differential is just where it was a few months ago, and therefore you still get paid to hold this pair.
The long game
Keep in mind that this pair is a choppy and grinding type of pair, but ultimately this is a situation where the market is very sluggish, but over the longer term you do make quite a bit of swap and interest payments at the end of the day, so it does end up being a profitable trade, and it is helpful that the market is very slow moving in general.
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