- The Aussie dollar has bounce from the crucial 200-Day EMA against the Swiss franc during trading on Monday, and it looks as if the 0.59 CHF level may have had some influence as well.
- Quite frankly, we have seen the Swiss franc strengthen quite drastically over the last several trading sessions against not only the Aussie dollar, but many other currencies, which flies in the face of the reality.
Swiss National Bank
Remember, the Swiss were one of the first central banks in the world to start cutting rates, and therefore it’s difficult to imagine a scenario where the Swiss suddenly are going to be attracting a lot of inflows, with perhaps the exception of some type of major “risk off move.” This is most certainly something that is possible, but I also recognize that is very unlikely that it happens without some type of financial shock. That shock could come in the spectrum of geopolitics, some type of financial meltdown, or of course the whole litany of other things. However, right now it does not look like we have to worry too much about it, and therefore I like the idea of buying higher yielding currencies against the Swiss franc, and that of course includes the Australian dollar.
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Underneath, we have the 200-Day EMA which a lot of people will be paying close attention to, as it is a highly followed technical indicator. With this being said, I believe it is probably only a matter of time before buyers look at this as a short-term floor, but if we were to break down below there, it would be a very negative turn of events. At that point, I could see the AUD/CHF pair dropping down to the 0.58 level, an area that previously had acted as support.
Remember, you get paid at the end of every day to hang on to this pair, and I think a lot of institutional traders are looking at it through that prism. All across the Forex world, we see a lot of “carry trading” currently going on, and this is a pair that is very good for that as the central banks are diametrically opposed when it comes to monetary policy.
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