SNB Decision on Thursday—What to Expect in the CHF

Cory Mitchell, CMT

On Thursday the SNB will release its interest rate announcement. The Swiss aren't expected to deviate from their current -0.75% target., which has been in place since early 2015.

The Swiss franc (CHF) continues to strengthen against the Euro (EUR), though. The SNB has historically tried to keep the EUR up and CHF down, thus helping its export-driven economy.

The British pound (GBP) sits near a decade low against the CHF. Even the USD is historically still quite weak compared to the CHF, but has stabilized over the long-term.

The following charts hows the Euro, pound, and U.S. dollar have all fallen over time against the CHF. 

EURUSD, GBPUSD and USDCHF comparison over the long-term

Chance of a Policy Change?

There is no indication that the SNB will deviate from their current policy, but if the EUR continues to weaken substantially in the coming months there may be a policy change, potentially unexpected. The unexpected change would likely help fuel a dumping of Swiss francs (in favor of other currencies) which would help push all these currency pairs (EURCHF, GBP/CHF, and USD/CHF) up. 

Something to watch for down the road.

As for now, more of the same is expected. And historically, over the long-term, the SNB hasn't been very successful in thwarting trader's desire to buy the CHF or getting them to dump it, as shown by the chart above.

EUR/CHF Currency Pair Outlook

The EUR/CHF currency pair has put in a rounded top formation since September, which was preceded by a steep decline. The pair is still currently hovering above a short-term rising trendline. 

A break below the trendline would help confirm that the trajectory for this pair is down, unless something radical happens in the ECB rate decision (also this week), or the SNB decision.

EURCHF daily chart in descending channel with rounded top Dec 11 2019

By Cory Mitchell, CMT, join me on Twitter @corymitc.

Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.


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