By Russell Glaser – The Swiss franc continues to perform well, particularly versus the two major currencies the dollar and the euro. Traders are anticipating intervention by the Swiss National Bank (SNB) to halt the appreciation of the franc. The assumption is the SNB will jump in and attempt to weaken the franc on the open market. This provides traders an opportunity to enter into a strong trend as the USD/CHF targets its 2010 low.
The franc was stronger today with the USD/CHF trading as low as 1.0221before closing 1.0250. This follows an opening day price of 1.0280. The EUR/CHF was also lower, trading at 1.3025, after opening the day at 1.3072.
Many have been caught off guard following the strength of the franc despite its reputation as a safe haven asset. The renewed vigor follows the last time the SNB ended its intervention in the currency markets and the USD/CHF dropped 10% of its value.
In addition to safe haven buying, fundamentals in the Swiss economy are also a positive for the franc. According to SNB board member Jean-Pierre Danthine, deflationary pressures have all but disappeared. Retail sales in July climbed 0.9% from the previous month. Today the Swiss employment level was released on par with market estimates of 3.97M. Speculators may also have a hand at pushing the Swiss franc as far as it will go until the SNB shows its resolve to stop the appreciation.
Looking at the technicals, the USD/CHF is currently trading at the support level on the weekly chart of 1.0250 (S1). We will be looking for a close below this level to trigger further selling. The next target for the pair rests at the January low for the pair at 1.0130 (S2). Any move to the upside should see resistance at this week’s high of 1.0450, followed by the downward sloping trend line that begins in the middle of July.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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