USD/CHF Forecast: Capped By The Parity Level
Mike Wolf | Dec 15, 2018 06:46AM ET
SNB announced its interest rate decision last week and kept its ultra-accommodative monetary policy unchanged as expected.
The statement came out as expected by the market players, with the interest rate on sight deposits remaining fixed at -0.75%, and the three-month Libor target range at -1.25% to -0.25%.
The interest rate decision indicates that intervention will continue as needed in the foreign exchange market. It still considers that the Swiss franc is “highly valued” even though the currency has depreciated slightly in a value weighted by foreign trade. This is due to the strengthening of the dollar, while the franc hasn’t changed much, remaining at a high level against the euro.
On Wednesday, the Fed’s rate hike decision and FOMC Statement will be announced. It is a widely expected rate hike from Fed that should bring the overnight target range to 2.25%–2.50%. The key outcome of the post-rate decision press conference is the economic and the monetary policy outlook Powell is going to pursue. If the Fed chairman indicates a pause in the rate hiking cycle now, a decline in DXY and dollar sell-off may begin.
Technical analysis:
As seen on the Daily Chart, the pair capped by the parity level 1.0000.
The pair ended the week at 0.98840, RSI at 54 headed North on the Daily Charts. Above the current level, if the pair breaks out of the parity, the targets of the Bulls will be 1.00400, 1.0065 and 1.01110.
On the smaller chart timeframes, the pair tested SMA 200 on H4 Chart at 0.99900. A firm closing above the parity level may be the confirmation of the bullish continuation.
On the H1 chart, a bearish Black Swan and Butterfly formations send a bearish correction signal. Although a bullish flag is being printed on the chart, a break below 0.99760 can send the pair 0.99500 and 0.99200 levels which are shaped by EMA 50 and MA 20 on H4 Chart.
This chart has been published for educational purposes only and cannot be considered as a trading advice.
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