The Swiss Franc Versus The US Dollar

Yesterday Rick Santelli made an interesting point about the Swiss franc. He pointed out that the franc was up against every other currency during the Middle East crisis while the US dollar had edged down, and said it was an indication that the dollar is not the safe haven it used to be.

I agree. I've said many times that I'm bullish on the dollar, but not because I view the dollar as a sound currency. Nor do I view the Swiss franc as a sound currency. The dollar is simply where I want to be during a credit crisis. Switzerland is where I want to be during a geo-political crisis.

I was lucky to attend school there for a while. As students, we learned that the country is designed to be locked down in 15 minutes. Every single bridge in the entire country is rigged to explode. Massive underground bases exist beneath the mountains, impervious to attack. Indeed, more than once while skiing in the back country, fighter jets appeared from nowhere as if they'd been catapulted out from inside a nearby mountain. When the US invaded Libya in 1986, Switzerland practically became a bank vault in minutes. The USDCHF soared from 1.86 to 2.05 and we all ran downtown to exchange our dollars . . . and headed straight for the pub.

Obviously the Mid East mess had nothing to do with credit and everything to do with geo-politics.

I recently dumped my "Fight The Fed" long dollar position that I put on the day the Fed announced QE2. It was a nice trade, but I became very concerned when it could not get above 81.44 in January. Here were my Twitter comments at the time:

Unless USD reverses here and strongly surpasses 82, entire move since 2008 could be a bearish triangle targeting below 70.
13 Jan

Today's action in the USD is very bad. Bad for my entire view. Bad.
13 Jan

I must give credit to Santelli. It wasn't until he made the distinction about the Swiss franc yesterday that I realized the difference between the two.

I think eventually the dollar soars because of violent debt liquidation. I would then use the opportunity to diversify, not only my base currency, but the residency of my accounts as well.

Here is a long term dollar chart going back to 1983. Take a close look at the form of the price action.



This looks like the final subdivisions of a pattern called a running triangle seen in the example below on the right. My estimation has us at point D with E to come, then a new low most likely below 70.



The point is that it's an ending pattern which is close to completion, at which time price reverses and targets point A. I would not be at all happy to see the dollar go to 70 or below. But it would be thrilling to witness it confound nearly everyone by heading above 120.

I haven't traded currencies much since the dark days of 2008. I was out of most of them by mid-2009 when central banks started gumming up the works and competitively devaluing. Many of the charts with the exception of the Japanese yen are less than clear to me. I'm standing aside waiting patiently for the yen to get below 80.