In the world of forex trading, cross pairs offer a unique opportunity to navigate market uncertainties, especially when major currency pairs involving the USD face turbulence.

Trading cross pairs, like CAD/CHF, allows traders to capitalize on the relative strengths and weaknesses of different economies without the direct influence of the USD.

This strategy is particularly useful in times of uncertainty, providing a fresh perspective on market movements and potential profits.

Focus on CAD Strength

The Canadian Dollar (CAD) has been showing significant strength in the market recently. This trend is underpinned by several key factors:

  • Commercial Buying Activity: According to the Commitment of Traders (CoT) reports, commercial traders are buying CAD at levels not seen since the 1980s. This substantial buying interest signals strong confidence in the CAD from institutional players.
  • Interest Rates: The Bank of Canada has set the interest rate at a robust 4.75%. With inflation rising to 2.9% in Q1 of 2024, there is a possibility that the Bank of Canada may maintain or even increase these rates to control inflation.
  • Economic Indicators: Rising inflation and strong economic performance are contributing to the CAD’s attractiveness as a strong currency in the forex market.

Addressing CHF Weakness

On the flip side, the Swiss Franc (CHF) is exhibiting notable weakness due to several reasons:

  • Rate Cuts by the Swiss National Bank: The Swiss National Bank (SNB) has cut interest rates to 1.25%, which is relatively low compared to other major economies.
  • Inflation Control: With the inflation rate within the SNB’s target range at 1.3%, there is less pressure to raise rates, leading to a weaker CHF.
  • Technical Analysis: CAD/CHF

From a technical perspective, CAD/CHF has just broken above a key consolidation level around 0.6580. This breakout indicates a potential bullish trend for the pair. The previous consolidation area could now serve as a support level, providing a strong base for further upward movement.

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