Potential Signal:
- I am a buyer of this pair if we can close above the 0.91 level, putting a stop loss at the 0.9025 level, and moving my stop loss to break even at 0.92.
- If we can get above there, then it becomes more “buy-and-hold.”
The US dollar rallied a bit during the early hours on Wednesday and then rose even further after the Federal Reserve meeting. That being said though, we are still seeing the same resistance barrier above, which I think will set up the USD/CHF pair for a potential trade that I will be eyeballing. Ultimately, this is a pair that I’ve been watching a lot recently, due to the fact that the Swiss National Bank has been so dovish, while the Federal Reserve remains very steady and even in its hawkish behavior.
Federal Reserve
The Federal Reserve had its interest rate decision on Wednesday, which remained flat, but the statement was just a touch more hawkish than before, and there is the very real possibility that the Federal Reserve will stay put for the rest of the year, and that should continue to drive the US dollar higher. After all, inflation is sticky in the United States, and of course this is a scenario where that will continue to keep the Federal Reserve on the sidelines. I don’t necessarily think that they are looking to hike rates yet, but they certainly are nowhere near cutting them. In fact, after the announcement we started to see interest rates rise in America, which continues to put upward pressure on the greenback.
Contrast this with the Swiss National Bank, which of course has recently seen the reason to cut by 50 basis points. That of course is a very negative turn of events, and it shows a bit of panic. All things being equal, the market is going to continue to look at the Swiss with suspicion, and therefore with the interest rate in Switzerland being very loose, and it’s very likely that the Swiss will continue to rates going forward, so therefore puts a natural barrier on any real strength with the Swiss franc, barring some type of “safety trade” that enters the markets again.
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