- The US dollar has been slightly positive against the Swiss franc during the trading session on Tuesday, as we continue to bounce around a crucial support level.
- The 0.90 level is a large, round, psychologically significant figure that a lot of people pay close attention to, and now it’s worth noting that the 50 Day EMA is sitting in the same region.
- Because of this, it’s very difficult to imagine that this is a situation where traders are looking at this through the prism of a total collapse, mainly due to the fact that there seems to be more interest in the US dollar suddenly.
This makes perfect sense, due to the fact that the 0.90 level has been important multiple times. In fact, when you look at the last couple of months, you can see that we are essentially at the bottom of the consolidation area, and therefore it makes sense that there would be people willing to get involved here. Beyond that, you need to think about the interest rate differential between United States and Switzerland, which is wide enough to drive a truck through, and therefore you get paid quite handsomely at the end of every trading session via the swap.
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Remember, the Swiss National Bank recently cut interest rates by 50 basis points in a bit of a panic move, mirroring New Zealand. However, by contrast we have seen the Federal Reserve stay tight with its monetary policy, and it’s likely that we will continue to see that being the case, as inflation numbers in the United States have remained somewhat “sticky.”
Going Forward
While I don’t necessarily think this will be the straightforward market that most traders are looking for, I do think that over the longer term the US dollar will continue to rise against the Swiss franc. The market will almost certainly continue to be noisy, but I think we are more likely than not eventually going to go higher. The 0.92 level above is a major resistance barrier, and anything above that level could have people piling into the US dollar.
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