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Uschf

Approaching huge levels in USDCHF and the CHF crosses Looking at client positioning it's interesting to see the CHF (Swiss franc) come up on the radar as one of the larger exposures held by clients – certainly more than usual. I suspect this is the case because the CHF is moving but we’re approaching some key levels in a number of the CHF pairs – I’d also add that there is increased discussion on the role of the CHF and whether it has morphed from being an out-and-out funding/safe-haven currency to one driven more intently by cyclical forces, inflation and expected rate hikes. We can look at the interest rates market and see the market toying with a further 50bp hike from the SNB at their next meeting (September). This would take them out of the negative interest rate regime. We’ve also seen a formal move away from the SNB buying foreign currency from commercial banks, which has resulted in a rise in the so-called ‘sight deposits’. Those sight deposits are now falling rapidly suggesting the opposite is true and the SNB is now buying CHF to support the currency – this was seen front and centre yesterday, where we saw total deposits fall by CHF 3.37b – the biggest fall since 2012. This is what many are coining ‘reverse currency wars’ – in an environment of high inflation, the race to a stronger currency is on! Before we get too carried away with SNB currency intervention we note that EURCHF is pushing parity, and the SNB will be looking at this cross rate above others. So, the need to aggressively buy CHF is reduced, and the idea of an aggressive and sustained fall in sight deposits is lowered. The next big date for CHF traders is the 4 July, when we get Swiss June CPI and while there is no consensus on this yet, the probability is that it builds on the current rate of 2.9% and wears a 3-handle. This should lift the implied probability of another 50-bp hike. With the CHF finding the love, the trade to put on (with hindsight) has been long CHFJPY, and that is trending well, although we’re seeing some consolidation in 142.00. NZDCHF has been the next weakest cross over the past month and again this is finding some support and consolidation after a powerful move from 0.6300. The set-up that is getting the most attention is USDCHF though – notably, we see a massive double top in play, with price consolidating into the neckline at 0.9544. If this gives way, the technical target is towards 0.9050, although given the implied volatility has settled down to 8.05%, a move of this magnitude may take time to evolve. One for the radar, if it isn’t already.
Short
by Pepperstone
Swissie at 8-month lows, KoF barometer nextThe Swiss franc has started the week quietly. Currently, USD/CHF is trading at 0.9398, up 0.08% on the day. The KoF Economic Barometer, a key indicator of business confidence, will be released on Tuesday (7:00 GMT). The KoF slipped below its long-term average of 100 in January, with a reading of 96.5. The indicator rebounded in February, rising to 102.7 and the upswing is expected to continue, with a forecast of 1o4.2 for March. The Swiss franc remains under pressure and climbed to 0.9417 on Friday, its highest level since July 2020. USD/CHF has shot up 3.46% in the month of March and pushed into 94- territory. Despite this sharp decline, the Swiss National Bank stated at last week's policy meeting that the currency remained "highly valued". This reflects the agenda of the central bank to keep the Swiss franc at low levels by purchasing massive amounts of dollars, in order to protect the Swiss economy, which is heavily reliant on exports, as well as combating deflation. The SNB maintained its interest rates at -0.75%, among the lowest in the world. The problem for the SNB is that the world views the Swiss franc as a safe-haven asset, which makes it an attractive holding for investors, particularly in times of crisis or uncertainty. With the SNB keeping low negative rates in place and continuously intervening in forex markets, there is a strong likelihood that the Swiss franc's downturn will continue in the coming weeks, which could mean the currency will put upward pressure on the 95 level. On Wednesday, Credit Suisse Economic Expectations releases its monthly report (8:00 GMT). The index rose to 55.5 in January, up from 43.2 beforehand. Another acceleration in February could give a boost to USD/CHF. USD/CHF faces resistance at 0.9463. This is followed by resistance at 0.9538. On the downside, 0.9268 remains relevant. Below, there is support at 0.9148. The pair is currently trading just shy of the 38.2% retracement from the 52-week high, at 0.9402.
by OANDA