Potential signal
I am ok buying here, with a stop-loss at the 0.5750 level and a target of 0.60. This is more about the swap.
The Australian dollar initially tried to rally against the Swiss franc during the trading session on Wednesday but gave back gains rather quickly to test the 0.58 level. All things being equal, this is a market that continues to see a lot of questions asked of the interest rate differential and risk appetite.
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After all, the Australian dollar is considered to be a little bit risky in comparison to the Swiss franc, but the interest rate differential is wide enough to drive a truck through. As the Swiss National Bank continues to hang on to a zero interest rate policy, this is a market that I do like buying and holding onto for the longer-term carry trade, but I also recognize that you will more likely than not have to be fairly patient.
Tight range persists
The market has been in a 60-pip range for about three and a half weeks now. I'm not looking for big moves. What I'm looking for is to collect profit at the end of every day in the form of swap. The 50-day EMA is currently at the 0.5775 level and rising, and has been a bit like a trend line at this point.
All things being equal, this is a market that I think continues to see a lot of value hunters on dips. Quite frankly, if this pair falls, I'm willing to buy it. But, for that matter, I'm willing to buy it here.
I think this is a market that should continue to rise, as the Australians are quite a bit more hawkish than the Swiss are. Although the one thing that could turn this around is if, for some reason, we start running back to the Swiss franc for safety. That more likely than not would be a short-term thing, though.
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