USD/CHF fell on Friday as traders continue to buy back the Franc after the lack of a rise in the “floor” of the EUR/CHF pair. Traders had expected the Swiss National Bank to raise the minimum accepted rate in this pair, forcing the world to sell of the Franc again. The announcement didn’t happen on Thursday, and as a result the speculators that tried to anticipate the move got burnt.
The pair should continue to rise over time though, as the US economy is much better off than Switzerland’s. The Swiss have the unfortunately problem of having the EU as it’s number one export market, and massively so. If your best customer is broke, you aren’t going to be selling much. The Swiss economy is more than likely going into recession, and as a result the Franc will continue to be sold off over time.
The Dollar also enjoys being the “safe haven” currency du jour at the moment, and the Franc cannot be so like it was traditionally because of the actions of the central bank. Because of this, we have a situation where the pair can really only go in one direction over the long term. This will sit well with many traders as this pair is less prone to exaggerated moves, and a steady stair step type move up has been found over the last couple of months. This is the epitome of what many traders are looking for. In this financial environment, it’s a rare thing to see steady markets in anything.
The European Union would have to get its act together to think that the Swiss will walk away from all of this unharmed. The truth is that the trend in this pair has changed on the longer-term charts as well, and as a result we like buying dips in this pair. The market seems to agree with this thesis, so it is the one we will stick with. As long as we are over the 0.85 mark, we think the uptrend is still intact in this pair.
Written by FX Empire