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The influence of the Swiss National Bank on their ownchange is evident on EUR / CHF, but you can see in USD / CHF the sharp decline of the volatility as well. Anyway, the recent evolution of the spread between the spot exchange rate and the 200-days moving average has to be underlined. When this spread rises above the threshold of +8%, then a maximum in the USD / CHF is presumable, with a subsequent lateral / descending phase. This is the current reality, with a presumable extension of the trend for several weeks, at least until the 200 days average (currently at 0.8905) and the spot price will be the same; starting from that point, the market will be set for a possible restart to the top of the change, with the resistance level at 0.9770 that should still be difficult to overcome.
The USD / CHF cross is also quite important for its value on a forward-spread level, not well known but as effective as the BTP-Bund. We are talking about the yield spread between an Italian 10-years BTP anda Swiss one, now at 480 basis points. The second chart shows us how the USD / CHF exchange ratio anticipates approximately 21 weeks the BTP-Swiss spread (here on the reverse scale). Since 2009, the predictive power of USD / CHF is remarkable and the last three weeks of spread widening on bonds confirm it. What should we expect now? The good news for the Italian BTP is that for a couple of months, the spread compared to the Swiss one should be reduced, prior to a further deterioration of the Italian debt expected in the summer. Accidentally, our intermarket model linking EUR / CZK to the European bank sector (which should be bullish in the next two months before the return of the bears) had come to the same temporal results.
(Chart: Bloomberg source)
