The US Dollar rose against the Swiss Franc on Friday, as we continue to see people play the interest rate differential. This is a pair that pays you a positive swap as well, leading to even greater gains for some.
USD/CHF
The US Dollar has rallied significantly against the Swiss Franc during trading on Friday as we continue to see a lot of concerns around the world when it comes to whether or not the war will continue, whether or not energy continues to be a major issue and by extension keep inflation high.
The US inflation numbers have been stubborn and of course interest rates in America have risen quite drastically so with that being the case, I think you have to look at this as a market that is doing everything it can to try to break out above the 0.80 level, an area that has been important multiple times. It is a large and psychologically significant figure, and it also has the 200-day EMA.
Interest Rate Differentials and Central Bank Policy
The interest rate differential between the United States and Switzerland is huge and of course the Swiss National Bank has already made it clear that they are not going to tolerate major appreciation in the Swiss Franc, and they will intervene if things get out of hand.
With that being the case and the fact that the Swiss are hell-bent on sticking to a 0% interest rate policy, this is a market that I think continues to go higher over the longer term. Short-term pullbacks for me are buying opportunities here in what has been one of my better performing trades as of late. Not explosive but just a nice grind higher that pays me at the end of every day with the interest rate differential being so favorable.