Potential signal:
- Buying at 0.9275 with a stop of 0.92, and a target of 0.9425 is my plan.
The euro rallied early on Monday against the Swiss franc, as we continue to see this pair grind higher. However, by the end of the session, it looks like we are running out of steam here.
EUR/CHF
The euro rallied a bit during the early part of the Monday session against the Swiss franc but has given back those gains pretty quickly as we continue to see a little bit of resistance around the 0.9250 level. That being said, the interest rate differential continues to favor the euro quite significantly, and therefore, I'm not overly concerned about this EUR/CHF market suddenly rolling over.
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Granted, this is a market that also has a bit of a risk appetite question attached to it due to the fact that the Swiss franc is considered to be a safety currency, but ultimately, I think any pullback at this point opens up the possibility of buying the dip. The 0.92 level underneath should continue to be support, and as long as we can stay above there, I think you have a shot at this market going higher. If we do clear the 0.9275 level, then we can go looking at the 0.93 level.
The Carry Trade and Long-Term Technical Outlook
This is a pair that is very slow-moving most of the time, but you do get paid a swap at the end of every day, and that's essentially what this is about: it's about the so-called carry trade. The 50-day EMA is at 0.9180 and rising, and I think that will come into the picture as being important as well, so therefore I like the idea of finding value in the form of any dip that shows the first signs of a bounce.
Longer term, I do think that we are in the midst of trying to bottom out, and if you look at the action for most of the year, you can start to make an argument for some type of ascending triangle being formed. If that ascending triangle does break out to the upside, you could be talking about a move to roughly 0.9550 longer term. That being said, you will have to be patient because this market tends to move.
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