Swiss to Charge Forward with Currency Intervention

The Swiss National Bank has been intervening in the currency market since March. Unlike other central banks who have failed at intervention, the SNB has done a fantastic job keeping EUR/CHF above 1.50 for the past 3 months. The SNB focuses on EUR/CHF over USD/CHF because the European Union is by far the country’s largest trading partner. The Swiss National Bank has a monetary policy decision on Thursday and interest rates are expected to remain at 0.25 percent. If they could, Switzerland would probably cut interest rates. The State Secretariat for Economic Affairs just released their latest economic forecasts. GDP growth is expected to contract by 2.7 percent this year compared to a prior forecast of -2.2 percent. The economy is also now expected to shrink instead of grow in 2010. Therefore the SNB will not be abandoning their loose monetary policies anytime soon.

However for currency traders, the more important takeaway from the meeting will be the Swiss National Bank’s reluctance to rescind its commitment to currency intervention. If that is the case, then current levels may present a buying opportunity for range traders as the SNB is likely to actively maintain this incredibly yawn inducing range in EUR/CHF.

Meanwhile the EUR/JPY trade that I posted earlier this week has hit its target of the first standard deviation Bollinger Band. The 50-day SMA now at 132.30 will provide some support but if that level is broken, we could see a move down to 130.

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About Kathy Lien 236 Articles

Kathy Lien is an Internationally Published Author and Chief Strategist of DailyFX.com, one of the world’s most popular online websites for currency research. Her trading books include the highly acclaimed, Day Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2005, Wiley); High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia); and Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley). As Chief Currency Strategist at FXCM, Kathy is responsible for providing research and analysis for DailyFX, the research arm of FXCM. She also co-edits the BK Forex Advisor, an Investopedia.com Premium Service with Boris Schlossberg – one of the few investment advisory letters focusing strictly on the 2 Trillion/day FX market.

Kathy is also one of the authors of Investopedia’s Forex Education section and has written for Tradingmarkets.com, the Asia Times Online, Stocks & Commodities Magazine, MarketWatch, ActiveTrader Magazine, Currency Trader, Futures Magazine and SFO. She is frequently quoted by Bloomberg, Reuters, the Wall street Journal, and the International Herald Tribune and has appeared on CNN, CNBC, CBS and Bloomberg Radio. She has also hosted trader chats on EliteTrader, eSignal and FXStreet, sharing her expertise in both technical and fundamental analysis.

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