The Euro has rallied during trading on Wednesday, as we continue to see the interest rate differential play out to the upside.
EUR/CHF
The Euro has exploded to the upside against the Swiss franc as we continue to see a lot of upward pressure testing the 0.93 level at this juncture. Ultimately, this is a market that I do think eventually gets enough momentum to really get this thing going. In that environment, you probably have a situation where traders are going to attempt to break above there.
It's worth noting there was a gap there. If the market were to break above the 0.9330 level, then it really takes off. Signs of exhaustion, I think, probably offer a little bit of a buy-on-the-dip attitude with the 200-day EMA sitting at the 0.9227 level.
Interest Rate Differentials and Long-Term Resistance
As long as the interest rate differential favors the Euro, the market opens up the possibility of a buy-and-hold situation. And when you look at the longer-term behavior, this is an area that we are approaching that was like a hard floor for a couple of years. This will continue to be an area that is important, and looks likely to see a lot of questions asked about it.
The question now is, can we break out above there? If we cannot, it could leave this market down to the 0.90 level, but I think at that point in time, you'd have to see the Swiss franc strengthen against almost everything, and you'd have to be worried about the Swiss National Bank intervening. Ultimately, I do think we break out to the upside. We'll just have to see how this plays out. This is a market that more than likely continues to see a lot of choppiness, but you get paid at the end of each day, which helps the ability to hold.
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