- The US dollar pulled back just a little during trading on Friday, but buyers appear to be returning to just below the 0.91 level. \
- This is a market that has taken off like a rocket.
- After all, the Swiss National Bank cut interest rates by 50 basis points, which most people would assume is a bit of a panic.
At the same time, the Federal Reserve is unlikely to cut rates significantly next year. According to the Fed futures markets, we’re looking at a total of 50 basis points of cuts in America for all of 2025, with the first coming in May and the second in December.
Interest rate swaps and parity
In other words, this USD/CHF pair will continue to pay you at the end of each day. Short-term pullbacks are a buying opportunity for me. I recognize that we are testing a very significant resistance barrier in this area and I think it is probably only a matter of time before we remove it. If and when we break the 0.92 level, it opens up a huge move to the parity level. That’s 800 pips. And that’s a big deal when we’re talking about the dollar versus the Swiss franc. You also get paid at the end of each day. So this is a trade you want to be involved in if it starts. Meanwhile, a short-term pullback could offer some value that people are willing to take with the 0.90 level below offering some support and the 0.89 below being even more important.
We recently had a so-called Golden Cross when the 50-day EMA crosses above the 200-day EMA and looks poised to continue going higher, but we are a bit stretched in the short term. So, be aware of the fact that this is a market that could get a little dry, but I believe a lot of people will be willing to jump in.
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