The amazing intervention by the SNB was very successful, and sent Dollar/Swiss leaping up. Will it relax now? Or push on? The upcoming week consists of a rate decision. The SNB will be able to detail on future moves. Here is an outlook for the upcoming events, and an updated technical analysis for USD/CHF.
The Swiss authorities have failed in the past. This time seems different – with a pledge for “unlimited currency buys” and other strong words such as “not tolerate”. The SNB’s floor of 1.20 beneath EUR/CHF had extreme implications for USD/CHF and also indirect implications for EUR/USD.
USD/CHF chart with support and resistance lines on it. Click to enlarge:
- PPI: Wednesday, 7:15. Deflation was one of the reasons for the huge intervention by the SNB. This has been evident in recent months, especially in consumer prices, but also producer prices dropped in the last three months. The drop this time is expected to be lower than last month’s -0.6%.
- Industrial Production: Thursday, 7:15. Contrary to many other countries, this is a quarterly index, making it more important. The sharp drop of 9.2% in Q1 will likely be followed by a small rise in Q2.
- Rate decision: Thursday, 7:30. This time it is a regular meeting of the SNB. No change is expected in the rock bottom Libor Rate. The central bank will have a chance to provide further insight on the stunning move, and give some future guidance regarding future changes in this policy.
* All times are GMT.
USD/CHF Technical Analysis
Dollar/Swiss traded in a very limited range before the big intervention. The move by the SNB sent it around 700 pips higher in the initial move, and it continued uphill from there. It closed at 0.8829, a gain of nearly 1000 pips.
Note that we are in a totally different range from last week.
Technical lines from top to bottom:
We start from 0.9370, which was a stubborn cap back in March and is serious resistance. It is followed by 0.92, which is a minor line after working as support at the beginning of the year.
0.9126 was a double bottom in March and is now resistance. The round number of 0.90 will be closely watched on an upwards move. It served as support in March and turned into resistance in April.
Also the round number of 0.89 switched positions. After working twice as support, it worked as resistance in May. Below we find 0.8765, which worked as support back in May and was a stepping stone in the recent surge.
0.8626 was also a stepping stone on the way up now, and worked as support beforehand. Below, 0.8553 was an all time low in May and afterwards capped the pair quite stubbornly.
0.8463 was the next all time low and is minor support. 0.8383 follows as minor support. The last line for now is 0.8240, which was the final frontier before the huge intervention.
I turn from bullish to neutral on USD/CHF.
The movements of this pair depend a lot on the moves of the euro. If the euro loses more ground against the dollar, USD/CHF will continue upwards, as the SNB put a floor of 1.20 under EUR/CHF. But if the euro stabilizes, the Swiss franc has a chance to stabilize – it is still a worthy currency.
Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the New Zealanddollar (kiwi), read the NZD forecast.
- For USD/CAD (loonie), check out the Canadian dollar
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