- During my analysis of major currency pairs during the trading session on Wednesday, it’s obvious that the US dollar has lost quite a bit of strength, not only against the Swiss franc, but against multiple currencies as well.
- However, it’s also worth noting that we are in an area that could very well be interesting for those looking to “buy on the dip”, which is something that I find myself looking at.
It’s worth noting that the 50 Day EMA sits just below current trading, near the 0.90 level. The 0.90 level of course is a large, round, psychologically significant figure, and an area that has been important more than once. That being said, I think the market is likely to continue to see a lot of value hunting in this area, and if we can get some type of bounce, I will get long of this pair. However, it’s worth noting that Services PMI came into points lower than anticipated, so that might have led a little bit more people to start shorting the greenback. That being said, I think we’ve got a situation where traders will continue to look for value, as although the US dollar has softened a bit, the reality is that Switzerland is stuck.
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Recently, we have seen the Swiss National Bank cut interest rates by 50 basis points, and quite frankly it looks like they are going to continue to cut aggressively. If that’s going to be the case, it weakens the Swiss franc, barring some type of major “risk off scenario” that we find ourselves in. If that doesn’t come, then it’s only a matter of time before the Swiss franc gets beaten up. However, despite the fact that the US dollar has softened a bit, the Federal Reserve is still light years away from cutting rates, and quite frankly, the interest rate differential alone will make getting long of this pair a reasonable trade.
All things being equal, I have no interest whatsoever in shorting this USD/CHF pair, despite the fact that we just formed a double top at a major resistance barrier near 0.92. In order to be a good technical analysis type trader, you also have to be aware of the fundamentals, and the fundamentals do not help the Swiss franc at this point.
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