SNB Policy: Rates on Hold, “Expansive” Stance Remains
The Swiss National Bank (SNB) kept rates unchanged earlier this week at 0.0%. Following the decision, comments from SNB Chairman Martin Schlegel—combined with technical resistance—helped push the USDCHF lower (strengthening the CHF).
Key Takeaways from Chairman Schlegel:
-
Policy Stance: Schlegel stressed that the current stance remains “expansive” and supportive of growth.
-
Inflation Outlook: Midterm inflation pressures are essentially unchanged. He downplayed recent softer inflation readings, expecting inflation to rise gradually as accommodative policy and growth prospects take effect.
-
FX & Rates: Low interest rates remain effective via the exchange rate. The SNB stands ready to intervene in FX markets if necessary, noting that rate differentials are a key driver of currency moves.
-
Future Tools: While the bar for returning to negative rates is higher, they remain an option if warranted.
-
Risks: Significant risks persist, including U.S. trade policy, though fiscal conditions should be broadly supportive next year.
Technical Analysis: The Range Holds
Technically, the price action this week confirms the importance of the long-standing trading range that has confined the pair since September (roughly between 0.7900 and 0.80876).
-
Failed Breakout: On Monday and Tuesday, the price moved marginally above the high of that swing area, reaching 0.8085 and 0.8083, respectively.
-
The Reversal: These highs failed to sustain momentum, sparking a run to the downside that began on Wednesday and continued through Thursday.
The Breakdown: Failing at the 0.8000 Midpoint
A critical technical development occurred during Wednesday’s trade when the price fell below its 50% midpoint at 0.8000—a level that also serves as a natural psychological anchor.
-
The Retest: On Thursday, the price corrected up to test that 0.8000 level.
-
Seller Reaction: Sellers leaned in against that resistance, initiating another leg lower.
-
Support Found: That decline extended to a swing area between 0.7924 and 0.7928, where buyers finally stepped in to push the price higher into the close.
Current Setup: The 38.2% Retracement Hurdle
In trading today, the move to the upside has continued, but modestly. The current price is trading near session highs at 0.7963, off the low from yesterday near 0.7924. However, the recovery is facing a new hurdle:
-
Resistance: The rally is still short of the broken 38.2% retracement of the trading range (measured from the November high to November low). That level comes in at 0.7971.
What to Watch Next:
-
Bullish Case: If buyers are to take back control, they need to break above 0.7971 and push back toward the 0.8000 midpoint.
-
Bearish Case: Absent a break of 0.7971, sellers remain in control, keeping the focus on the downside.
Watch the Video Analysis:
In the video above, I (Greg Michalowski, author of Attacking Currency Trends) break down the technical factors driving the move, outline where the risk is, and map out the next targets that matter most for USDCHF traders.
Be aware. Be prepared.
This article was written by Greg Michalowski at investinglive.com.