The short-term uncertainty regarding the geopolitical situation and COVID-19 could keep CHF supported until the end of 2020. However, the Swiss National Bank is likely to prevent the CHF from appreciating by intervening in the foreign exchange market, if necessary. In 2021, it is expected that the CHF will depreciate slightly against the EUR thanks to better prospects for the global economy and the overvalued CHF.
The Swiss National Bank is another major central bank that will hold its last policy meeting this year, next week. No policy changes are anticipated by the Bank on Thursday. But as we expect from Chairman Thomas Jordan, his choice of words to describe exchange rates will be watched very closely. Given the CHF’s rapid appreciation approaching 6-year highs versus a weaker USD, there may be some reference to the currency.
The Swiss franc appears to have been fairly stable against the Euro, weakening and holding below the peak seen in May, when it hit a 5-year high, as the single currency regains ground. However, the SNB is under renewed pressure at the moment, as the US Dollar continues to fall against the safe-haven franc, falling to its lowest level since January 2015 in the past week. Although the USDCHF exchange rate is not as important as the EURCHF rate, the scale of the significant decline in the greenback can be a strong reason for intervention by the central bank. The US Treasury is not very “friendly” to currency intervention and there could be repercussions for the SNB if it decides to implement such a policy.
USDCHF intraday bias is back neutral with weekend recovery. The upside of the recovery is limited by the support of 0.8982 which becomes resistance to continue the decline. On the downside, a break of 0.8850 support should continue deeper downtrend for 0.8698.
EURCHF intraday bias turned neutral with the weekend recovery. But further decline is expected as long as the resistance 1.0800 is intact. On the downside, below 1.0735 should continue the decline from 1.0871 to retest 1.0659, as another decline in consolidation pattern from 1.0915. However, a strong break of 1.0800 will lead to a retest of the 1.0871 resistance.
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Ady Phangestu
Analyst – HF Indonesia
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