- We initially saw the US dollar pull back just a bit against the Swiss franc on Monday, but we've also seen a turnaround in rally quite significantly.
- At this point, we are still very much in the same consolidation area that we have been in for a couple of weeks now.
- So, I don't know if anything's really changed. However, if we were able to rally from here and take out the 200 day EMA, which is right around the 0.8880 level, then we could see more momentum to the upside.
Keep in mind that the interest rate differential does favor the US dollar and the US dollar is trying to fight back against multiple currencies. We'll just have to wait and see how this plays out.
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Below…
Underneath current trading, it has the 0.8750 level offering support. And if we were to break down below there, then the market could drop to the 0.86 level. This is a market that recently has been hanging around this area, which is also the 50 % Fibonacci retracement level from the big move higher. So, we are at a prime area for a lot of volatility and choppy and just erratic behavior.
Because of this, it would be a bit cautious, but I do recognize that it's hard to ignore the fact that you get paid at the end of every day to hold this USD/CHF pair as a long. I think if this pair does break down, it's probably a scenario where I'll start to look to short the US dollar against other currencies, not this one. But the Swiss franc is typically thought of as a funding currency. So, if we break to the upside, this could also end up being a signal for other pairs like the British pound against the Swiss franc or perhaps even the Australian dollar against the Swiss franc depending on if it's a risk on type of move. Ultimately, interest rate differential still favors the upside, but this is a very sluggish market under the best of conditions.
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