The euro continues to see a lot of support against the Swiss franc, as we are looking at a potential carry trade situation playing out here. This pair has been falling until recently, so the basing pattern is catching my attention.
EUR/CHF
The euro has been really back and forth during the trading session as the 0.93 level continues to offer resistance. Furthermore, we have the 200-day EMA sitting there, so that continues to cause a significant amount of resistance as well.
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That being said, the interest rate differential still favors the European currency over the Swiss currency, and I do think that carry traders are looking at this through the possibility of some type of basing pattern. If the market were to break above the 0.93 level, I feel like this is a market that could become very interesting.
The question is, will this pair turn around?
The 50-day EMA currently sits at 0.9346, an area that more likely than not would be a certain amount of resistance just based on that moving average. To take off to the upside, you could see the market looking to go to the 0.95 level eventually, where we had fallen apart from. This would be a longer-term view, and something that would be difficult to obtain, but the trending nature of this pair could make it happen eventually.
I would also point out that this might be a way to mitigate some of the energy concerns because, quite frankly, Switzerland will have all of the same concerns that Germany will. So maybe, just maybe, that will end up being the case going forward.
The Swiss franc obviously is a safe-haven currency, but in general, the interest rate differential between the Swiss franc and pretty much anything continues to put pressure on the Swiss franc in multiple other currency pairs. A break above 0.93 has me interested in the upside.
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