EURCHF, Daily
Another great weekend for the FIFA 2018 World Cup, with many teams performing above expectations and only a few failing to deliver. Of the teams we have featured here in our occasional series only England have qualified for the last 16. Mexico look likely to join them, and Japan will too if they beat Poland, in their final Group H game. Poland have lost both of their games so far and have already been eliminated. Today’s team, Switzerland, upset pre-tournament favourites Brazil with a well deserved draw in their first game, had a controversial win over Serbia on Friday night and also look likely to progress to the last 16.
Switzerland is one of the most developed countries in the world, with the highest nominal wealth per adult and the eighth-highest per capita gross domestic product according to the IMF. Switzerland is a fiercely independent country which sits at the geographic heart of Europe, with 4 official languages and a constitution of consisting of 26 Cantons which also have a large degree of autonomy from the central federal constitution.
The Swiss Franc is seen as a safe-haven currency, often accruing as sentiment turns to “risk-off” mode and in times of volatility in Equity and Bond markets. The fierce independence that runs throughout Switzerland is no different when it comes to the Swiss National bank (SNB), which, following the financial crisis of 2007/8 established a maximum price for the Swiss Franc at CHF1.20 per EUR, its major trading partner. This exchange-rate peg was established in 2011 and removed, without any suggestion that it was even considering such a move, on January 15 2015, creating a big shock in the markets and a virtually instant decline in EURCHF of 20%. The January low that year touched 0.9667, and it took until April 2018 before the 1.20 handle was once again breached.
Today EURCHF has support at the 1.1550 level (23.6 Fibonacci level), 1.1444 (Fractal low, lower Bollinger band and S3) and 1.1360 (May 2108 low and height of latest Italian Crisis). Immediate resistance is at 1.1547 (20 day moving average and R1), 1.1610 (38.2 Fibonacci level and R3) and 1.1670 (Fractal Highs, Upper Bollinger band and 50.0 Fibonacci zone). CHF remains a safe-haven currency and just last week, at the latest SNB press conference, it was business as usual. There is an interventionist central bank, “we will remain active in the foreign exchange market”, still advocating a “expansionary monetary policy” (negative interest rates) and a continuing belief that “the currency remains highly valued”. It concluded that ” The situation on the foreign exchange market thus remains fragile, and the negative interest rate and our willingness to intervene in the foreign exchange market as necessary therefore remains essential.”
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Stuart Cowell
Senior Market Analyst
HotForex
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