Potential signal:
- On a CPI reading over 0.2% (Core CPI m/m) in America, I am buying this pair, with a 100-pip stop.
- If it is strong enough, I am looking for 0.8450 above.
- The US dollar rose against the Swiss franc on Thursday, as we continue to see rates rise in the United States.
- On the other side, we have the Swiss National Bank holding tight to 0% rates.
USD/CHF
The U.S. dollar has rallied during the trading session on Thursday, spiking toward the 0.8150 level. The 0.8150 level has offered a bit of a barrier over the last couple of months, but when you look at this pair, the one thing that I think of first is the interest rate differential that favors the U.S. dollar.
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This is a market that is balancing between higher rates in America and the fact that we had recently seen a little bit of a surprise coming out of Switzerland in the form of GDP hotter than anticipated, as well as inflation, mainly driven by energy, of course. At this market level, I think that you have a lot of people willing to step in and buy dips.
Breaking above the 0.8150 level could open up a move to the 0.82 level.
If the market were to break down below the 50-day EMA, it's also possible that the market could even drop down to the 200-day EMA just above the 0.80 level. This is a market that is very noisy and very choppy, but the whole point of this currency pair is to get paid at the end of every day.
It's a nice carry trade situation, and with the Swiss National Bank seemingly having no interest whatsoever in raising rates, then I do think that makes this an easier long to take in favor of the U.S. dollar than you see in multiple other currency pairs.
We've recently seen a nice run higher. The question is, can we break to a fresh new high near the 0.82 level? Ultimately, this is a market that's right on the precipice of a potential breakout to the upside, perhaps targeting 0.85 over the longer term, but right now, a lot of patience will be needed.
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