The carry trade seems to be alive and well in the USD/CHF pair on Monday, as we continue to recover from recent selling pressures. With fresh employment data, it is obvious that the U.S. economy isn’t cooling off.
USD/CHF
The U.S. dollar initially dropped against the Swiss franc, actually gapping lower to kick off the week, but then turned around to show signs of life. The market had jumped to the 50-day EMA, an indicator that a lot of people will be watching closely.
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If the market were to break above that 50-day EMA significantly, then I think you've got a situation where the 0.84 level could be targeted eventually. I still like the idea of buying dips here because, quite frankly, the Swiss National Bank has reiterated its desire to have zero interest rates, and the swap alone makes this a huge winner for me.
It's more about the carry trade and the grind to the upside.
Granted, you will have to be a bit patient. You'll have to realize that this is not a quick-moving pair, nor is it a market that is overly dynamic. I've got no interest in shorting. I'm not paying this swap.
Of course, the fact that the Swiss National Bank is doing everything it can to keep rates at zero, while the Federal Reserve almost certainly will raise rates in December, to me is a perfect combination. Furthermore, beyond all of that, if there is in fact an energy crunch on the European continent over the winter, Switzerland is not immune from that either.
So really, at this point in time, I think this is a market that could continue to grind to the upside and recover. A little bit of patience could go a long way here, but time should be on the side of the bullish, as the central banks certainly are.
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