The US dollar has jumped against the Swiss Franc during the trading session here on Tuesday as the 0.78 level continues to be an area of interest.
All things being equal, this is a market that continues to see a lot of volatility and choppiness, but the market I think will be watching the 50-day EMA more than anything else.
If we can break above there, then the US dollar should really start to take off to the upside, I think ultimately reaching the 0.80 level. Short-term pullbacks I think have plenty of support underneath, not only due to the fact that rates in the United States continue to climb, but we also have the Swiss National Bank out there looking to basically support the USD/CHF market no matter what.
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And what I mean by that is they want to keep the Swiss Franc somewhat reasonably priced. They will intervene and buy the USD/CHF pair as well as the Euro against the Franc, that is really what they are concerned about and therefore you do have to worry about the occasional intervention.
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With that being said and the fact that you get an interest rate payment at the end of every day, it makes sense to own the dollar against the Swiss Franc. The interest rates in America would start dropping on good news so ironically despite the fact that most people sell the Franc when things are safe or good, it may not be as explosive as it normally would be, but I think it would still drift higher.
As rates drop in America it is still a huge beneficial trade to the upside. If we were to break down, I don’t short this pair. If the US dollar starts to crumble, I will just sell it against other pairs, that way maybe I can buy the Euro or the Pound or something like that and avoid central bank headaches.
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