USDCHF Longs Favored – SNB Indicates Negative Rates To Continue

In the first Press Conference this year, the Swiss National Bank (SNB) announced that its expansionary monetary policy shall remained deployed as before. The interest rates for sight deposits were maintained at -0.75% and the target range for the three-month Libor stayed unchanged from -1.25% to -0.25%.

At the meeting on Thursday the central bank stated that if there is any turbulence due to the “Brexit” possibility, intervention in the foreign exchange market will be conducted immediately to offset it.

A continuation of the negative interest rate and SNB’s stance on financial markets may continue to cast a shadow on the Swiss franc, making the currency less attractive versus its rivals.

Meanwhile, in the Federal Reserve meeting that concluded yesterday, the benchmark rate was left unchanged in June as dark clouds hover over the US labor market. The referendum on continued British membership of the European Union is another key reason that made the FED’s decision harder, given the potential for global financial instability in the event of Britain exiting the EU. The central bank yesterday indicated that the US benchmark rate will be increased more than once this year, but investors currently still hold doubts on the probability of this happening.

The Bureau of Labor Statistics released Consumer Price Index (CPI) data for May earlier today. The data came in with an increase of 1.2% in comparison with the reading for April. The index advanced an annualised rate of 1% last month. The core CPI, which eliminates the cost of food and energy, inched up 0.2% in May.

In the week ending on June 10, initial jobless claims were at 277,000, higher than the expectation of 267,000. In the week prior, the number of people filing for unemployment benefits was at 264,000. The latest data show that the US labor market is still sluggish and continues to weigh on overall economic growth.

Tomorrow, building permits for May will be published by the Census Bureau. Permits are forecast to come in at 1.15 million, a little higher than the previous reading of 1.12 million in April.

usdchf d1

Fig. USDCHF D1 Technical Chart

The greenback is on track to advancing against the swissie after falling to break the support of 0.95680. The 23.6% Fibonacci retracement is currently acting as a firm resistance for prices. However, RSI (14) is edging up, indicating that the bull is stepping in. The pair USDCHF may surge higher, breaking out from the 23.6% level and may pull back once if it cannot sustain above the 38.2% level.

Trade suggestion

Buy stop at 0.96962, Stop loss at 0.96308, Take profit at 0. 97694

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