Potential signal:
- I am buying this pair on a break of the 50 Day EMA, essentially the 0.8220 level, with a stop at 0.81, and a target of 0.8385 above.
- The U.S. dollar rose quickly against the Swiss franc on Friday, as the interest rate differential got some reassurance due to the employment numbers in the U.S. being so strong.
USD/CHF
The U.S. dollar has rallied pretty significantly during the trading session here on Friday, as the nonfarm payroll announcement was much hotter than anticipated. The 165,000 jobs added last month were 100,000 more than people had anticipated. This, of course, caught most traders off guard, and the move was rapid.
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Because of this, you now have the interest rate differential really starting to come into the picture, as the Swiss National Bank is hanging on to a zero-interest-rate policy. They have recently had some inflation data come out, and they anticipate below 1% not only this last quarter but the next one. Therefore, the Swiss National Bank is likely to continue to work against the value of the franc in that situation.
The US economy shows no signs of slowing down
The U.S. dollar, of course, is backed by the Federal Reserve, which, seeing more employment out there, is likely to lead to more spending and therefore more inflation. The U.S. economy shows no signs of slowing down. Therefore, we find ourselves going into the weekend testing the bottom of the previous consolidation area.
For me, this is a pair that is quite simple. If it breaks above the 50-day EMA, which ostensibly is taking out the high of the trading session on Friday, I think we have more momentum. We will just have to wait and see, but real rates are still positive in America, not so much in Switzerland. Over time, that tends to favor a currency.
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