- The Swiss Franc gained against most pairs on Monday.
- Swiss Franc is a safe-haven currency, which tends to appreciate in times of crisis.
- The Federal Reserve, European Central Bank and Bank of England are all scheduled to make announcements after their meetings this week.
The Swiss Franc (CHF) is gaining against most major pairs on Monday after sinking in the US morning session. Strong US jobs data from Friday led the CHF into weakness at the start of the week, but the Swiss Franc gained later in the session due to investors positioning for several major central banks' policy decisions later in the week.
The USD/CHF has dropped 0.17%, while the EUR/CHF has sunk 0.16% at the time of writing. The GBP/CFH is trading 0.10% lower.
Daily digest market movers: USD/CHF edges higher ahead of US CPI data and Fed meeting
- The Swiss Franc continues to edge lower versus US Dollar (USD) on Monday after the release of the US Nonfarm Payrolls report for November showed an above-expectations improvement in most metrics, including the Unemployment Rate, which fell to 3.7% from the 3.9% forecast.
- The data indicates the US economy is healthier than many economists had thought and that fresh inflationary pressures may still emerge.
- This could make the US Federal Reserve (Fed) keep interest rates higher for longer and delay any rate cuts the market was anticipating in 2024.
- Higher-for-longer interest rates will benefit the US Dollar since they attract higher capital inflows.
- The next big data release for the US Dollar is US CPI data for November, scheduled for release at 13:30 GMT on Tuesday, December 12.
Swiss Franc technical analysis: USD/CHF continues short-term bullish trend
USD/CHF – the number of Swiss Francs that one US Dollar can buy – continues to gently push higher on Monday.
The pair is rising after having completed a Measured Move price pattern during October and November. Measured Moves are three wave patterns that look like large zig-zags. The first and third waves are usually of a similar length. Wave C completed after achieving the same length as A. This further reinforces the bullish reversal since the December 4 lows.
US Dollar vs Swiss Franc: Daily Chart
The MACD has completed a bullish cross (circled) in negative territory, adding more evidence, signaling potentially more upside on the horizon.
The short-term trend is bullish, and more gains are possible. The 0.8825 target, which offers soft resistance, has almost been met. If surpassed, prices could rise to the confluence of major moving averages residing at 0.8900, where tougher resistance is expected.
A break below the 0.8667 lows would negate the recovery and see bears back in charge, with likely losses to the 0.8552 July lows.
Daily digest market movers: EUR/CHF trades flat ahead of ECB meeting
- The Swiss Franc reverses a weak open and edges higher against the Euro on Monday.
- Euro traders are waiting for the European Central Bank (ECB) meeting later in the week.
- Lower-than-expected Eurozone inflation data as a whole suggests a risk the European Central Bank will cut interest rates, which is limiting gains for the Single Currency.
- The next main event for the Euro is the European Central Bank policy meeting on Thursday, December 14.
- The most recent Inflation release from Germany came out in line with expectations, with the country’s Harmonized Index of Consumer Prices (HICP) rising 2.3% YoY in November but falling 0.7% MoM, according to data from the Federal Statistics Office of Germany.
- Lower interest rates, or their expectation, tend to weaken a currency as they reduce capital inflows.
Swiss Franc technical analysis: EUR/CHF edges lower after run-up
EUR/CHF – the number of Swiss Francs that one Euro can buy – trades flat after bottoming on December 7.
Last Thursday’s Bullish Engulfing Japanese candlestick reversal pattern (see rectangle on chart below) at the level of a major support and resistance level was confirmed by the green bullish day on Friday. This provides a short-term bullish signal for the pair.
Euro vs Swiss Franc: Daily Chart
The pair has also probably reversed trend in the short-term, suggesting bulls have the upper hand temporarily. The medium and long-term trend, however, are still probably bearish, suggesting a risk of recapitulation remains.
A break below the 0.9403 lows would reconfirm the bearish bias and see prices fall into uncharted territory, with major whole numbers then expected to provide support at 0.9300, 0.9200, and so on.
Daily digest market movers: GBP/CHF rises as risk appetite favors Sterling
- The Swiss Franc falls versus the Pound Sterling (GBP) pair on Monday as strong US labor market data eases global recession fears, supporting riskier currencies like the Pound Sterling over safe-havens such as the Swiss Franc.
- Pound Sterling traders are now awaiting the Bank of England (BoE) meeting on Thursday for a steer on the future course of interest rates in the UK.
- Higher interest rates, or their expectation, are generally positive for a currency as they attract greater inflows of foreign capital. The opposite is true of lower interest rates.
- The market view of the course of future interest rates in the UK has turned more dovish recently, in line with most of the rest of the world. Traders in interest rate futures saw a relatively high chance of the BoE cutting interest rates by 0.75% (three 0.25% cuts) in 2024, as per data reported on Thursday, December 7.
Swiss Franc technical analysis: GBP/CHF rising from range lows
GBP/CHF – the number of Swiss Francs that one Pound Sterling can buy – is rising within sideways short and long-term timeframes – the medium-term trend, meanwhile, could be classified as marginally bullish.
On the 4-hour chart used to analyze the short-term trend, the pair continues to bounce higher within the parameters of a range-corridor between 1.0990 and 1.1155.
Pound Sterling vs Swiss Franc: 4-hour Chart
It is possible to see the outline of a complete measured move in the zig-zag of price action down from the November 29 high, with wave C completing at the November 7 low.
The MACD has risen above its signal line whilst well below the zero line, further adding weight to the short-term bullish outlook. Indeed, looked at throughout December, the MACD looks like it might have formed a wide double-bottom bullish reversal pattern, further amplifying the strength of the bullish crossover buy signal.
All in all, the short-term chart suggests the GBP/CHF pair is in the midst of a bullish ascent back up to the range highs at 1.1155. A break above the 1.1040 level would provide further confirmatory evidence a new leg higher was underway.
Swiss Franc FAQs
What key factors drive the Swiss Franc?
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
Why is the Swiss Franc considered a safe-haven currency?
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
How do decisions of the Swiss National Bank impact the Swiss Franc?
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
How does economic data influence the value of the Swiss Franc?
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
How does the Eurozone monetary policy affect the Swiss Franc?
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
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