USD/CHF weekly outlook

Negative Interest Rate

According to Reuters, SNB was not happy about the  negative interest rate of – 0.75% it charges  the banks who park money with it overnight. The SNB has no alternative to ultra-expansive monetary policy, while the virus crisis has created a great appreciation pressure on safe Francs, SNB Chair Thomas Jordan said in an interview session with the SonntagsZeitung newspaper.

The -0.75% SNB negative interest rate is the lowest interest rate in the world at the moment,  after the BOJ -0.10%. The Franc has become its main attraction as a safe asset with a stable political climate and has not changed much. The SNB has taken this route while maintaining negative interest rates to avoid more difficult circumstances. The SNB also increased foreign currency purchases to reduce Franc increases. Deposits in the central bank, that are seen as a proxy for SNB intervention, have increased by almost 77 billion francs this year, while the CHF has risen to the highest level against the EUR, since July 2015.

USD/CHF

Last week’s USDCHF bounced, but was confined under Resistance as well as the 0.9800 round number. Bias still looks neutral for this week in a fairly wide sideways range of  200 pips. Breaking the 0.9680 minor Support will turn the bias to the downside with next Support at 0.9588 and the low price of 0.9500. A break of 0.9800 will target testing at the price of 0.9900.

In the daily period, higher prices are being formed that are lower than before and the impression from price projections is narrower in the formation of triangle patterns. The 200-DMA has become a dynamic Resistance that has been retested 3 times, while the RSI is at  the 50 center line and MACD’s histogram line up above the neutral level of the MACD.

In the 4-hour period, the 0.9800 area implies a stronger Resistance level than the lower Support level. However the MA’s slope in the middle of the consolidation zone occurred for the past 7 weeks.  More indications to the negative side at 4-hour chart, with RSI entering a downward bias at 44 and MACD histogram approaching 0 zone.