Earlier today, USD/CHF broke above .9330 level triggering stops at .9335 which had been capping rallies over the last few weeks. This bullish momentum should be sustained till the 100 day moving average (light blue line) at .9391. The 20 day moving average is down at .9293 with further bullish trend support down around .9250. At this time we see more upside potential due to the fact that the Swiss Franc has sold off tremendously over the last few months. For the past 18 months, we have witnessed some massive flows in USD/CHF where long-term petrodollar accounts in Switzerland have moved out of the USD and into the CHF. In more recent days what we have been seeing is fresh ‘petrodollar’ money moving immediately out of USD and into EUR in particular. We have also heard of reports that Middle East accounts are moving out of CHF and into USD. This might be only a very temporary phenomenon or there could be something more to it. The Swiss Franc is sort of the canary in the coal mine and it could send us a powerful signal that the dollar is bottoming for this cycle. We will also be keeping an eye on EUR/CHF since this cross has considerable influence on USD/CHF. As a word of caution, if the Middle East turmoil picks up it could send safe haven currencies such as the Swiss Franc to new record lows against the USD. We have also been watching the economic data from Switzerland and keeping an eye on comments from the SNB, we believe the SNB will refrain from raising interest rates for awhile due to the current level of the Swiss Franc.

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