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Mass closing of trading deals US Dollar/Swiss Franc The pair is down 7% from its July peak. The Swiss franc has also been imitating the Japanese yen, albeit on a smaller scale. Let’s discuss this and make a trading plan.
The article covers the following topics:
Key points and highlights
- The collapse of the USDCHF currency pair is due to the closing of trading deals.
- The Swiss National Bank is unlikely to intervene in the foreign exchange market, despite demands from Swiss producers.
- A major interest rate cut is likely in September.
- The USDCHF pair is likely to continue rising towards 0.874 and 0.884.
Weekly Fundamental Forecast for the Franc
The metrics are different. The Japanese yen and the Swiss franc have been on a rollercoaster ride, but usd/jpyA 13% drop from its July highs has taken our breath away, while a nearly 7% drop from US Dollar/Swiss Franc But the Swiss franc’s rise against the euro to its highest level since early 2015 has forced Swiss Mem, Switzerland’s largest business lobby group, to panic and ask the national bank for help.
The carry trade market that uses the franc as a funding currency is much smaller than the one for the yen. The Swiss franc was the best performing G10 currency last year amid active support from the Swiss National Bank, which did not hesitate to use currency interventions to revalue its currency and thus reduce import prices.
Conversely, the Japanese yen has been steadily depreciating for at least three consecutive years, creating ideal conditions for foreign exchange traders.
The Bank of Japan has long maintained a very easy monetary policy, while the Swiss National Bank tightened its monetary policy in 2022 and 2023, like most of its peers, including the Federal Reserve and the European Central Bank. However, Swiss interest rates remained low, a key condition for a funding currency. In 2024, the Swiss National Bank has already eased its monetary policy twice against the backdrop of stable inflation in the 0%-2% target range.
Inflation trends in Switzerland
Source: Bloomberg.
By contrast, the Bank of Japan has been on a path of monetary policy normalization. Thus, raising the overnight interest rate to 0.25% and tapering quantitative easing in late July led to a reduction in long positions on bond yields, which triggered a real storm in financial markets, dubbed “Black Monday.” Rumors of a US recession after disappointing jobs numbers added insult to injury.
The Bank of Japan’s statement that it would not raise interest rates overnight amid market volatility and US jobless claims falling at the fastest pace in nearly a year brought calm to the forex market, allowing US Dollar/Swiss Franc The bulls have started to recover some of their losses. JPMorgan claims that 75% of all margin positions have been closed, which does not rule out the risk of a repeat of the shocks, albeit on a smaller scale.
USDCHF Weekly Trading Plan
The Swiss National Bank is expected to refrain from currency intervention, which has been called for by Swiss Meem Bank. However, the bank is likely to cut its key interest rate for the third time this year in September amid slower inflation than its estimate of 1.5% at the end of the third quarter. This could put pressure on the franc, and with the Fed expected to taper its monetary expansion, this could further strengthen the franc. US Dollar/Swiss Franc Around 0.874 and 0.884. My advice is to stop. sale And think about going long term.
USDCHF Real Time Price Chart
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