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During my analysis of major currency pairs, the USD/CHF pair has captured my attention, as we had seen a massive breakout, only to pull back during the trading session on Thursday. With this, the market looks as if it is going to respect the 0.8950 level, at least so far, as we have bounced from that level as well.
It is worth noting that that area has been important a couple of times in the past, so it does make a certain amount of sense that“market memory” comes into play. Things being equal, the market is very technically driven, but there have been a couple of things that have come about over the last several days that I think you have to take into account when trading this pair.
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The Swiss National Bank last week cut interest rates by 50 basis points, which was a bit of a shock move, as it was only expected to cut by 25 basis points. This shows that perhaps the Swiss are extraordinarily concerned about financial conditions, and it also suggests that perhaps the Swiss might be willing to go negative. The Federal Reserve has cut interest rates by 25 basis points, but suddenly looks very unlikely to continue cutting rapidly. This happened on Wednesday, as Jerome Powell probably had his worst press conference of his entire tenure.
EURUSD Chart by TradingView
At this point in time, think short-term dips will continue to offer buying opportunities and the interest rate differential will continue to be wide enough to drive a truck through. In other words, you get paid to hang on to this pair, and therefore I have no interest in trying to short this USD/CHF pair anytime soon. In fact, it's not until we break down below the 0.88 level that I become even remotely concerned about the longer term trend that we have been in over the last several months. That does not mean that we take off and hit the stratosphere right away, just that the upside is still the only way I'm looking.
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