- During my daily analysis of the major currency pairs, the USD/CHF pair caught my attention as we saw a lot of volatility.
- What caught my attention more than anything else is that the 0.90 level seems to have offered some amount of support.
- Whether or not it will hold remains to be seen, but this looks like a market that is essentially “being held underwater”.
Swiss National Bank
I believe the biggest driver of this USD/CHF pair at the moment is the Swiss National Bank, which recently cut interest rates by 50 basis points, when it was expected to cut 25 basis points. This suggests that the Swiss may be very nervous about what they are seeing around the world, and perhaps more specifically, the European Union. Remember, 85% of Swiss exports go to the European Union, so unfortunately for the Swiss, they are very much in bed with the Europeans economically.
Interest rate differentials continue to favor the United States, despite the fact that we saw interest rates fall slightly during Monday’s session. In other words, you are getting paid to hold this pair, despite the fact that many people view the Swiss franc as a “safe haven”. While that is true, the reality is that the US dollar is also another safe-haven currency, so that aspect of trading is a little muted here in this general vicinity.
If we were to break higher and clear the recent high of the last couple of days, then I think we’ll be making a move for a much bigger trade, maybe all the way to parity, but obviously it’s going to take a certain amount of time to get there. Keep in mind that this pair is usually a bit slower than the others, so it would definitely be a long-term move.
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