On Thursday, a regular meeting of the Swiss National Bank took place, at which the bank maintained its monetary policy unchanged. The Swiss National Bank left the deposit rate at -0.75%, where it has been located since January 2015. It also left a three-month LIBOR rate in the range from -1.25% to -0.25%.
The bank’s statement said that this decision and the decline in economic forecasts “was mainly due to the deterioration of the prospects for economic growth and inflation abroad, as well as the associated decrease in expectations regarding interest rates in key economic regions”.
This statement was partly confirmed on Friday, when the weak, much worse than forecast, macro data came out, indicating an acceleration of the slowdown of the European economy.
The Swiss franc reacted with restraint to the decision of the NBS, which traditionally considers the franc to be overbought, which does not allow for a more active increase in the growth rate of the Swiss economy. GDP in the fourth quarter grew by only 1.4%, as recently reported in the government of the country.
The economic barometer KOF in February fell by 3.8 points and amounted to 92.4, continuing to decline from the long-term average of 100. Since September last year, the index has lost 10 points. "We can expect that the Swiss economy will show weakness in the coming months", said the KOF Economic Research Agency report.
Most likely, the interest rate of the NBS will not change in the near future.
Soft monetary policy of the central bank usually contributes to keeping the national currency rate low. Nevertheless, the franc maintains stability in the foreign exchange market, receiving support from franc buyers, who traditionally use it as a protective asset during periods of heightened turbulence in financial markets and the uncertainty of the political situation in the world.
Meanwhile, the dollar strengthened significantly over the past two days after falling on Wednesday, when the Fed unexpectedly announced its propensity for a softer monetary policy. At the beginning of the European session on Friday, DXY dollar index futures traded near the 96.20 mark, 103 points higher than the minimum reached on Wednesday.
From the news for today we are waiting for the publication (at 13:45 GMT) of the PMI indices from Markit Economics for the USA. The preliminary manufacturing PMI index is expected to be 53.6 in March (against 53.0 in February), while the composite PMI index is expected to be 55.2 against 55.5 in February. Data worse than forecasts can trigger a fall in the dollar and the closure of long positions on it at the end of the week.
At the beginning of the European session, the USD/CHF is trading near the level of 0.9945, through which the strong resistance level (EMA144 on the daily chart) passes.
The indicators OsMA and Stochastic on the 1-hour, 4-hour charts turned to long positions.
In the case of the breakdown of the resistance level of 0.9945, the growth of USD/CHF will continue, and the positive dynamics will again increase. In the case of a confirmed breakdown of the key support level of 0.9920 (ЕМА200 on the daily chart and the Fibonacci level 50% of the upward correction to the last wave of decline since November 2018 and from 1.0130), the negative dynamics will increase. A break of this level will increase the risks of breaking the USD/CHF uptrend.
Support Levels: 0.9920, 0.9875, 0.9815, 0.9785, 0.9745, 0.9720
Resistance Levels: 0.9945, 0.9970, 0.9990, 1.0005, 1.0050, 1.0090, 1.0130, 1.0160
Trading Scenarios
Sell Stop 0.9910. Stop Loss 0.9955. Take-Profit 0.9875, 0.9800, 0.9780, 0.9745, 0.9720 Buy Stop 0.9950. Stop Loss 0.9910. Take-Profit 0.9990, 1.0005, 1.0050, 1.0090, 1.0130, 1.0160
