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  • USD/CHF has been on the back foot for most of the session, dropping from above 0.9300 to the low 92.00s.
  • Bullish sight deposit data means CHF is the G10 outperformer ahead of this week’s SNB meeting.

USD/CHF has been on the back foot for the majority of Monday’s session, dropping all the way from above-0.9300 peaks to lows in the 0.9220s. The pair is eyeing a test of last week’s lows in the 0.9210s and below that a potential test of the pair’s 21DMA which currently sits just above the 0.9200 level. On the session, the pair trades lower by about 0.6% or just over 50 pips and CHF is the best performing of the G10 currencies on the session.

Lack of SNB intervention boosts CHF

Weekly Swiss Sight Deposit data showed sight deposits in domestic banks dropped to CHF 628.684B last week from CHF 631.837B the week before – this matter for FX markets because when the SNB has been actively intervening in FX markets (i.e. selling CHF to buy other currencies in an effort to weaken CHF), sight deposits tend to rise. Falling sight deposits tend to signal a less interventionist SNB, as was the case with Monday morning’s numbers, hence why CHF has been the best performer on the day.

However, CHF traders ought to remember that coming up later in the week is the SNB monetary policy decision; the bank will keep interest rates at -0.75% and is likely to reiterate that deeply negative interest rates and FX intervention remain necessary in order for it to attain its monetary goals. The bank has recently commented that it has plenty of room left on its balance sheet to expand its activity (i.e. it can print plenty more CHFs) – such a dovish message, though expected, is unlikely to do CHF many favours.

The Week Ahead

USD/CHF will be volatile on events on both side of the Atlantic this week; in the US, a heavy slate of Fed speak, the release of the preliminary US Markit PMI survey for this month on Wednesday and the release of Core PCE data on Friday will keep the dollar traders busy. Meanwhile, the aforementioned SNB meeting is the main event for CHF traders to watch and the rate decision is due at 08:30GMT on Thursday. CHF traders should also watch the path of the pandemic in Europe; as things worsen, this could support the preferred European safe-haven asset (CHF).