The euro has gone back and forth against the Swiss franc during trading on Tuesday as we continue to hang around the 50-day EMA.
All things being equal, this is a pair that I watch very closely because it has a major component to it that is all about risk appetite.
We have seen quite a bit of destruction when it comes to risk appetite, and I think here you have to look at the 0.92 level above as a potential ceiling. If we could break above there, then I think we could go looking into the 200-day EMA at the 0.9253 level. And while I recognize that this is a pair that could pull back, I think pullbacks are to be bought into because of the interest rate differential.
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The Swiss National Bank and Export Pressures
The EUR/CHF pair has been very noisy as of late, mainly due to headlines coming out of the Middle East and the possibility that maybe the Americans and the Iranians just aren't going to talk. This could kick off more kinetic warfare and if that ends up being the case, things could get rather ugly and generally speaking, people will run to the Swiss franc in that situation.
I believe that you have to look at this as a market that just doesn't really know what to do right now, but the safety of the Swiss franc makes sense as traders continue to try and sort out what the next move's going to be. The fact that the Americans and the Iranians have chosen not to speak is not a good sign. I think if we get a little bit too negative, though, we could see a situation where traders start to perhaps have to worry about the Swiss National Bank.
After all, the Swiss National Bank will come in and support this pair because 85% of Switzerland's exports head into the European Union and a strong Swiss franc causes headaches for the Swiss exporters. Over the longer term, I look at this as a pair that will offer a nice opportunity to collect swap at the end of every day if you're a buyer. Because of this, I am only going long, but now I need to see a little bit of momentum or perhaps a drop towards the 0.91 level and a bounce.
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