- The US dollar initially dropped a bit during the trading session on Thursday, only to turn around and show signs of life again.
- It actually made a higher high than the Wednesday session, but it is struggling a little bit in that general vicinity to continue going higher.
When you look at the longer term technical analysis in the USD/CHF pair, it is interesting that we are hanging about in the 50 % Fibonacci retracement level and it is perhaps a very realistic expectation that the interest rate differential between the United States and Switzerland will continue to at least attract a certain amount of buyers in this pair.
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After all, yields have actually been climbing in the United States. So, with that, it is very possible that the greenback goes looking at the 200 day EMA, which sits just below the 0.89 level. If we can break above that level, then I think we will get more of an acceleration to the upside. Conversely, if we were to break down below the 0.8750 level, then I think that shows extreme US dollar weakness, and we probably plunge from there. I would also look at other currency pairs at the same time, because you will generally see what happens with the US dollar in one move.
There are going to be some outliers right now, such as the Canadian dollar, but as things stand right now, this is a market that the swap still favors the US enough that I think there will be plenty of carry traders out there. If we can break above the 200 day EMA, then I think, like I said before, that we will see more momentum. Until then, it's more or less a short-term buy on the dip scenario.