The euro has launched higher against the Swiss franc on Monday, as the interest rate differential between the two continues to pay you to hold the pair.
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EUR/CHF Rises as Interest Rate Differential Continues to Support Euro
The euro has launched during trading on Monday against the Swiss franc as the 0.91 level continues to be important. The 0.91 level is an area that a lot of people will be watching very closely as traders are looking at the 50-day EMA above as a potential barrier. Even if we break above there, I think there will be a certain amount of resistance at the 0.9175 level.
The 0.91 level has been important multiple times and it's not a huge surprise that we have turned around here because, quite frankly, the interest rate differential favors the European Union over the Swiss franc. On top of that, we also have inflation rate in the EU coming out on Tuesday and if it ends up being stronger than the expected 3.2% year-over-year, that will further propel the euro higher, assuming that we don't get some type of huge rush to safety.
Interest Rate Differentials and Central Bank Policy
All things being equal, I do like the idea of buying dips in this pair. The euro is clearly much better supported with interest rates and the Swiss National Bank has made it clear that they are not hesitant to start intervening if the Swiss franc gets too strong.
That is something that we need to pay close attention to and as long as that's the case, I still think you have a serious situation where anytime that this pair drops, I think you have to assume that it's a buying opportunity. I have no interest whatsoever in trying to go short, in this pair, or any other one denominated in Swiss francs.
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