We are now on the precipice of a huge breakout from previous action, especially once we get closer to 0.82.
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USD/CHF
It's been pretty choppy during the trading session in the US dollar against the Swiss franc trading as we have seen a little bit of an overextension, run into some exhaustion and maybe just some malaise as we head into the weekend. It makes a certain amount of sense, mainly due to the fact that the weekends could bring in so much chaos due to headlines coming out of the Middle East, for example.
With that, and now we're starting to talk about tariffs again, it is a scenario where traders will have to more or less reassess everything on Monday as to where we are. There could be a huge gap in the oil market as a result of conflict in the Middle East, and then we'll see what that does with interest rates in America.
Golden Cross Signals Potential USD/CHF Breakout
Interest rate differential continues to favor the United States dollar by a country mile, and therefore it does not surprise me at all that we've recently seen the Golden Cross where the 50-day EMA breaks above the 200-day EMA. We are now on the precipice of a huge breakout from previous action, especially once we get closer to 0.82. At that point, we could see this market go to 0.85. We'll just have to wait and see.
Short-term pullbacks would make a certain amount of sense as we did consolidate and then break out. A lot of times you'll get a retest, but for me at least, I find that as value. I have no interest in shorting this pair. I don't want to pay the swap at the end of every day for the privilege to do so. If I wish to buy a currency against the US dollar, I want to buy something that offers more swap, not causes me to pay.
This is a market that's also backed by a central bank in Switzerland that does not want a strong Swiss franc and has no interest in raising rates. The Federal Reserve, on the other hand, may be forced to if inflation persists. With this, I remain bullish.