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The Aussie has initially pulled back just a bit against the Swiss franc, but we turned around to show signs of life again. By doing so, this is a market that I think will continue to test the crucial 50-day EMA just above, and I think a lot of traders are paying close attention to this area, as it is a technical indicator that a lot of people like.
Breaking above the 50-day EMA then puts the 0.60 level in focus, which of course is a large round, psychologically significant figure that could come into the picture and offer a little bit of resistance in and of itself. Regardless, you can see that for some time now we've been in an uptrend, and we had recently even fall enough to reach down to the 200-day EMA before turning around and showing signs of life again.
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Because of this, I think the market is trying to determine whether it is going to stay in an uptrend, and I think it will over the longer term mainly due to the interest rate differential. Keep in mind that the Australian dollar does pay you to hold it over the Swiss franc at the end of every session and if you hang on to it long enough, it starts to add up.
Carry Traders Unite!
The carry trade is very much alive now as interest rate differentials are starting to change quite rapidly between various currencies around the world. Keep in mind that the Swiss national bank recently cut rates and that of course is something front and center in the mindset of traders. And at the same time, the Australian dollar still pays a fair amount of interest and on top of that, it also gives you a little bit of exposure to Asia in case there is further growth. Even beyond that, you also have to look at it through the commodity play, because quite frankly in an inflationary environment, commodities do quite well. I remain a buyer of dibs.
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