The Swiss Franc has become one of those currencies, which generate very little interest. After all, the CHF has been capped at 1.20 versus the Euro for some time now and with rates at zero, there are few reasons to get excited about this currency from the fundamental point of view. It has been moving in tandem with the Euro, just as its peg intended. This is unlikely to change in the near future.
Couple of days ago, the Swiss National Bank confirmed its intention to maintain the EUR-CHF tie for the foreseeable future. This policy would only change in the event of rising interest rates. As things stand now, the SNB is unlikely to hike the rates this year and perhaps not even in 2014. In fact, the only threat to this scenario is the real estate market in Switzerland, which may be overheating. That could force the central bank to start the tightening cycle but for now the SNB is simply rising banks’ reserve requirement, to buffer the threat of possible defaults. Still, the real estate market in Switzerland seems to be the key to future moves by the SNB and is worth following.
Couple of posts back, I happened to mention a pair, which included the Swiss Franc. That was the CAD-CHF while forming a bullish divergence with the MACD on its daily chart. I was looking for a rebound in the price, as soon as some kind buy signal emerged. As mentioned, that was supposed to be bullish candlestick pattern. The next day the price formed a piercing line, which, while not as convincing as a bullish engulfing line or a hammer, was strong enough to take the trade. My entry was at 0.8906.
On Friday, the price continued higher, in line with projections. The problem emerged late in the day – should the position be held over the weekend or closed? I decided to exit the trade, with 59 pips profit. Even though it was somewhat short of the target, I did not want to risk a change in sentiment, which often happens after the weekend. Under the circumstances, I was content with smaller, but quick gains. Moving on.
The theme of last week on these pages was the Australian Dollar, with one more trade needing closure. It turned out that strength in the Aussie was not only versus the USD, but against other currencies as well. I discussed selling the EUR-AUD here, with order at 1.4700. This trade worked out as planned, reaching its full expectation of 150 pips. I will be returning to AUD crosses later this week.
Among the developments I will be watching this week, is the GBP-USD. It is showing early stages of possible top on its shorter-term chart. There are still couple of steps the price must make before the top is confirmed. I want to see a minor bottom near or below 1.5480, followed by a rebound of some magnitude. As long as the GBP-USD does not make new high, this potential low would mark eventual entry for a sell order, with good objective of 1.5250. Now let us see if it happens…
In the next post, I will cover the Japanese Yen. We could see increased volatility in all its crosses, especially after the BoJ policy meeting on Tuesday. More about it tomorrow. Have a great trading week!