Market Analysis

Can the Swiss franc free itself from its sideways movement?

The Swiss National Bank announced in Zurich on Thursday that it would maintain its interest rate course for the time being. However, it also flagged a big change. For the first time, the Swiss National Bank wants to introduce its own key interest rate. With this step, it is setting a new benchmark.

When setting their monetary policy, central banks usually take account of not only consumer prices but also the interest rate at which banks lend money to each other. For European banks, the so-called LIBOR (London Interbank Offered Rate) has been of great importance.

The move by the Swiss National Bank is forward-looking, as the British Financial Market Authority is expected to discontinue the calculation of the interest rate at the end of 2021. There have been several scandals about LIBOR in the past and it has therefore been regarded as an obsolete model for some time now.

Switzerland is known worldwide for its stable banking system. Surrounded by the European Economic Area, the euro plays a significant role. Therefore, it is currently worth taking a look at the EUR/CHF currency pair.

The market has been moving sideways at a high level since August/September 2018. On several occasions, the market tried to break through the upper levels at CHF1.145, but failed time and again. The lower edge of the sideways movement formed around the CHF1.122 area. Two attempts to break through this area failed as well.

Currently, the market is at the lower edge of the sideways movement, in the CHF1.122 area. This zone could be decisive for further progress of the market. If the market manages to jump over this hurdle, the next significant structural level and resistance zone could be in the CHF1.132 region. Further resistance zones on the way up could wait at CHF1.145 and CHF1.156.

If the market drops, the first support could be CHF1.114. Further support could be offered in the structural areas at CHF1.102 and CHF1.088.

The MACD oscillator showed a bullish cross, but this has not yet been confirmed. Because the two lines, the MACD line and its trigger line, are still trading below their zero lines. Only a crossing with the zero lines would mean a confirmation of the signal.


EURCHF Daily Chart Source ActivTrader

EUR/CHF Daily Chart | Source: ActivTrader


Written by Daniel Schuetz, External Analyst, ActivTrades

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