CHF news - page 4
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SNB To Meet & CHF Remains The Most Overvalued G10 Currency
CHF remains the most overvalued G10 currency and we expect it to underperform from here. For now the currency remains mainly driven by global risk sentiment. This is unlikely to change unless there is rising scope of the SNB considering additional policy action.
Regardless of still muted price developments, it appears unlikely that the central bank will consider additional policy steps as soon as this week. This is especially true as global conditions have been pretty stable owing to, among others, less adverse contagion from the Brexit vote than initially feared. Nevertheless, as the overvalued currency is keeping monetary conditions too tight and as forward looking indicators such as the KOF leading one paint a more lacklustre picture, there is no scope of them considering a less dovish stance neither. If anything the central bank should stick to a policy mix consisting of negative interest rates and currency intervention and such prospects should keep the franc’s safe haven appeal relatively low. Still, risk sentiment will stay an important driver.
As a result to the above outlined conditions we expect crosses such as EUR/CHF to remain well supported.
SNB announcement today. Here's Bloomberg on why to expect nothing.
Its central bank day! Bank of England and Swiss National Bank (links are to previews) coming up
SNB leaves key rates on hold
Swiss National Bank out with their latest policy assessment 15 Sept
Statement highlights:
Full assessment here
Switzerland trade balance August CHF +3.02bln vs +2.81bln prev
Switzerland August trade balance report 20 Sept 2016
USD/CHF Testing Support and Oversold
USD/CHF has followed through to the downside after establishing a top at the recent rally highs. The pair is currently trading at 0.9678, down 0.61% from yesterday’s U.S. close, as the dollar has sold off in the wake of the FOMC announcement, giving back all of the gains achieved following the firmer inflation data released last Friday.
USD/CHF is now within reach of support at the September 8th low at 0.96497. The proximity of this support, combined with the developing oversold condition on a daily basis and fully oversold condition on an intraday basis, should result in a temporary bounce. However, such a move appears best used as a selling opportunity, given the failed test of the 200-day moving average, which is now in place. A breakout above this moving average is required to turn the bias in the pair to the upside. And the recent attempt at such a move failed.
On a breakdown below the 0.96497 level, the target expected move is a further sell-off to the mid-August low at 0.95376 level, the next level of chart-based support.
At present, USD/CHF’s broader trend is best described as neutral, given the converging trendlines shown on the weekly chart. A sustained move outside of this narrowing price pattern is required to set the tone for the next important move for USD/CHF on a longer term basis.
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USD/CHF Holds Support, Marginally Higher in Today’s Trading
USD/CHF successfully tested support at the 0.9650 level in yesterday’s trading and is currently marginally higher, working off the oversold condition that developed as a result of the decline to support. The pair is currently trading at 0.9700, up 0.15%. With oversold conditions still a factor, a failure to maintain today’s rebound would be considered a sign of underlying weakness, calling for a return to the recent lows in the near term.
With yesterday’s test, key support is now in place at the September 8th low at 0.96497. On a breakdown below the 0.96497 level, the next expected move would be a further sell-off to the mid-August low at 0.95376 level, the next level of chart-based support.
On the upside, resistance in today’s trading is being provided by the 38.2% retracement of the recent sell-off at the 0.9716 level. A follow through above this retracement would leave the next levels to watch at the 50% and 61.8% retracements at 0.9735 and 0.9755. A sustained break above the 0.9755 level is required to suggest the increased potential for a return to the September 16th high at 0.98179. A rebound merely in reaction to the oversold condition should not be enough to drive the rally beyond the 61.8% retracement level.
At present, USD/CHF’s broader trend is best described as neutral, given the converging trendlines shown on the weekly chart. A sustained move outside of this narrowing price pattern is required to set the tone for the next important move for USD/CHF on a longer term basis.
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USD/CHF Weekly Forecast October 3-7
The Swiss Franc traded heavy for most of the prior week, while a sharp reversal at the end of the week has had markets questioning if the Swiss National Bank has once again intervened in the markets. Friday’s price action in USD/CHF took the pair back into positive territory for the week and will set a positive tone at the start of the new week.
The SNB is known to gauge the strength of its currency against the Euro, and the rise in EUR/CHF on Friday was the largest seen since July 12. The single day gain served to erase losses on the week, also sending the pair into positive territory for the week, with a bullish hammer print on the weekly chart. There has been some speculation that the bank views 1.08 as a floor in the pair, as there has not been a weekly close below the level this year, including the week of the EU referendum. The central bank did not confirm if they had in fact intervened in the markets.
Data in the past week remained light out of Switzerland. Out of the United States, Janet Yellen’s testimony offered little volatility as she was brief in her discussion of monetary policy. Inflation data indicated an improvement, as the core PCE price index figures indicated a rise of 1.7%, against a rise of 1.6% in the prior reading.
The focus for the upcoming week will be on Friday’s NFP figures out of the United States. Analyst expectations have been set at 171,000 against a prior reading of 151,000. The risk for the data remains to the upside for the Dollar as the latest rhetoric from the Fed indicated that the central bank is ready to raise rates in the absence of a deterioration in data. Out of Switzerland, CPI figures will be released on Thursday and are expected to come in at 0.2% in September. Retail sales and manufacturing PMI’s are scheduled for release on Monday.
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Switzerland mftg PMI Sept 53.2 vs 51.8 exp
Swiss September mftg PMI report 3 Oct
Is SNB establishing a de facto floor in EUR/CHF?
The SNB had to show its hand once more as it continues to establish a line in the sand in CHF appreciation, which we believe is 1.08 in EUR/CHF and 0.95 in USD/CHF.
In our view, the evidence points to further SNB intervention in the latter part of September. And even though the latest weekly sight deposit data did not hint at suspected SNB intervention on 30 September given the sharp intraday move higher, settlement convention (T+2) may mean that intervention could show up in next week's data. Nonetheless, the weekly changes in sight deposits through September indicate that further (albeit modest) intervention took place from mid-month onward. Without explicitly mentioning the 1.08 level as an official floor (and thus fuelling unwarranted speculation pressure), that level has held for much of the year.
Without stating as much, but keeping alive the threat of constant intervention, the SNB appears to have created a floor in EUR/CHF for now.
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