11:32, 21 September

USDCHF - Drops to Five Month Low Under 0.96 after SNB Holds

The USDCHF has fallen strongly in the last month moving from the key level of 1 down to a new five-month low just below 0.96 in the last 24 hours. There has been little support along the way in its decline during that period with few signs of buyers willing to jump in at lower levels. For an extended period prior to the fall, the USDCHF traded in a narrow range just below parity as it met stiff resistance from that level. The USDCHF did push through 1 for a short period reaching a 12 month high above 1.0050 around mid-July.

Parity remains a key level and is likely to continue to influence price should the USDCHF reverse and rally higher. Prior to the multi-month consolidation, the USDCHF had moved very strongly from multi-year lows below 0.92 in February up to around parity in early May. The surge higher was quite pronounced between mid-April and mid-May which saw the pair move 400 pips.

The potential upcoming key level is 0.9450 as this played a role earlier this year, providing resistance on several occasions. Price was rejected swiftly above it and forced down lower, although it eventually and slowly moved higher to begin its recent surge higher. The 0.9450 level also propped up the pair strongly in July / August last year and this level is likely to become relevant again should the USDCHF decline further.

On Thursday the Swiss National Bank (SNB) kept its main borrowing rate in negative territory at minus 0.75% despite a recent pickup in economic growth, although they are still concerned about the high value of the Swiss franc. The SNB said it will intervene in currency markets if needed to weaken the franc. The SNB said that since the bank's last meeting in June the Swiss franc "has appreciated noticeably, against the major currencies as well as against emerging market currencies. The Swiss franc is highly valued, and the situation on the foreign-exchange market is still fragile. The negative interest rate and the SNB’s willingness to intervene in the foreign exchange market as necessary remain essential in order to keep the attractiveness of Swiss franc investments low and thus ease pressure on the currency." SNB Chairman Thomas Jordan has previously stated that “We will adjust our monetary policy at the point when it is necessary. But it is of no use to change monetary policy too early in order to provoke an appreciation in the Swiss franc and then we will again have monetary conditions which are too tight.”