USD/CHF drifts higher as US-Swiss monetary policy disparity grows
Fawad Razaqzada April 4, 2018 12:10 PM
Ahead of Friday US jobs report, the USD/CHF has been among the strongest dollar pairs. This has been mainly due to a slumping CHF rather than a rallying USD. Indeed, the EUR/CHF and GBP/CHF have both been rising while the CHF/JPY has been falling of late. The Swiss franc remains fundamentally weak owing to a dovish central bank. The SNB charges banks interest on deposits while keeping the benchmark interest rate below zero, at -0.75%, to dissuade CHF investments. The Fed meanwhile has started to reduce its huge balance sheet and is set to raise interest rates at least two more times this year. The disparity between the Swiss and US monetary policies therefore continues to grow. In theory, the USD/CHF should continue to rise over time, ceteris paribus.
Now from a technical perspective, the Swissy has created several bullish signals already. After forming a false break reversal pattern at 0.9260, the USD/CHF has subsequently broken back above the 2017 low of 0.9420/5, making several higher highs and higher lows in the process. Clearly this is bullish behaviour of price. As a result, the path of least resistance remains to the upside. If it now manages to cleanly break above 0.9595 resistance then we could see a continuation towards the next bullish objectives at 0.9655 (200-day moving average), 0.9705 (old support) and 0.9735 (last support pre breakdown). Support meanwhile comes in at just below 0.9510.
Source: eSignal and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.