How to make money on CAD/CHF rates and what can you expect from the confrontation of a raw and safe asset?
On the chart, we can see an upward trend that began in March 2020, that is, for 2.5 years, investors have been steadily earning on Purchases of the Canadian dollar. During this time, the cost of CAD increased by 11.8%. This is the case when it costs to open a deal and forget about it for a couple of years to get an impressive profit, but has the maximum been reached?
Over the last 2 months, we observe a price correction. A stable downward movement may be a sign of a trend reversal. After all, it has been going on for quite a long time and during this time there have been many changes and many factors have been added that put pressure on both currencies.
The Canadian dollar strengthened not only due to the rise in oil prices but also due to the aggressive monetary policy of the Bank of Canada. Both factors can still support CAD, as well as good macroeconomic reports. We still consider the Canadian dollar to be one of the strongest currencies after the USD, but more and more risks for the global economy may lead to an increase in demand for safe assets. CHF has already significantly strengthened against CAD in this regard.
Next week will be the most relevant for those who decide to trade with CAD/CHF. The focus is on the decision of the Bank of Canada on the rate, as well as the publication of the business activity index, which last month was below 50 pips. We will also find out the unemployment rate in Canada and Switzerland.
We believe that the price correction is coming to an end. Knowing the hawkish nature of the Bank of Canada, they are unlikely to change it soon, given how actively other central banks are raising the interest rates. The trend reversal is questionable since the CAD is not so weakened to lose its position. Therefore, our choice is the deals to BUY. We believe that the chance to buy CAD at a reduced price is worth taking today, because next week, the Canadian dollar may cost more.
