SNB keeps rates on hold, What’s next for USD/CHF
|The Swiss National Bank left rates unchanged again at -0.75%. Thomas Jordans (Chairman of the SNB) comments were:
Risk of renewed upward pressure on the Swiss franc is high, the situation on forex market fragile.
It costs more to hedge against Swiss franc appreciation than against its depreciation on the options market.
Move away from Libor is a very challenging task for financial markets.
SARON is establishing itself as the leading reference rate for financial products, market participants have to prepare themselves for the post-Libor era.
Creation of liquid, SARON-based yield curve is very important for the Swiss financial system and for transmission of SNB monetary policy.
SARON stands for Swiss Average Rate Overnight with Libor meaning The London Bank Offering Rate, the old benchmark.
With regards to Jordan’s first comment ‘Risk of renewed upward pressure on the Swiss franc is high, the situation on forex market fragile’.
Can they (the SNB) stem the rise of the CHF and the fall of USDCHF as traders look to safe-haven currencies? Let’s take a look at the technical picture:
USDCHF Monthly: Continues to use 1.000 as a pivot point or mean average. Since 2015, USDCHF has failed to move a substantial distance away from this Big Figure. However, the whole choppy move from the 2011 lows could be seen as a large Ending Wedge pattern that has an eventual bias to break to the downside.
USDCHF Weekly: Broken the wedge formation to the downside. This pattern has a measured move target of 0.9190. Corrective upward pressure this week has seen a retest of the breakout level at 0.9962.
USDCHF Daily: Completed a 5-wave count to the downside (Elliott Wave). The move higher is mixed and volatile common in corrective formations. Looks like the early stages of a bearish Head and Shoulders pattern with this current corrective rally being the right shoulder. This corrective formation could take a while to playout. Resistance today is seen at 0.9971-76. Heading into next week and 1.0030-80 is solid upside resistance. We are looking at selling rallies to take USDCHF lower.
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