CHF: Swiss Franc are tending upwards again after correction

At the Forex currency market Swiss Franc rate is traded slightly upward on Friday morning; it seems that two-day correction had been sufficient and now, when external background has become tense again, investors’ interest to Franc is rising again.
Forex forecast: MACD indicator is in the negative area for the pair USD/CHF, and is going down, giving a sell signal. Stochastic Oscillator has come out of the oversold zone and is giving a buy signal.
Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.7560, the pair USD/CHF will go to 0.7530   and 0.7500. If downward breakdown does not take place, the pair will consolidate at the current levels.

Yesterday, Swiss National Bank intervened into the trades at the currency market; judging by the forwards sector, SNB continued to infuse liquidity at the trading floors to curb the growth of the Franc. We would remind that earlier, Swiss national Bank had restricted three- month Libor rate to 0-0.25% (it had amounted to 0-0.75% previously). They also stated that increasing rate of the Franc is a negative factor for the national economy; therefore Libor rate will tend to zero and the SNB is going to infuse liquidity into the market in the nearest future to “chill out” the Franc. SNB named the threat to economic progress and price instability as main arguments.

According to the representative of SNB Mr. Jordan, Central Bank of the country is prepared to take proactive measures to maintain financial stability in the market in the future; however the issue of the interest rate increase is not going to be discussed at the moment. In addition, short- term risks to price stability have a downward trend.

At the same time Mr Dantin stressed that Franc is still significantly overvalued; however the idea of pegging of Franc to the USD is difficult to implement, and therefore is not feasible at the moment. According to Dantin, present accommodative policy is completely justified.

It became known this week that consumer confidence index in Switzerland fell to -17 points in Q3 against the forecast of -5 points. The data released yesterday showed that unemployment rate in Switzerland remained at the level of 3.0% in July.

Talk that intensifies at the market indicates that as far as measures of the CNB did not succeed and the rate tends to zero, regulator can choose a different option guided by the experience in Brazil, and introduce a negative rate or tight control over capital movement.

Current data shows that the data released previously has been of a seasonal character and does not indicate recession of the economy. Index of leading indicators KOF in Switzerland fell to 2.04 in July, while the forecast had been 2.11.  The data released earlier showed that trade balance in Switzerland totaled +1.74 billion francs in June against preliminary revised level of +3.25 billion francs. According to statistics released earlier, level of retail sales in Switzerland rose by 7.4% y/y in June against the revised level of -3.9%  y/y in May. In addition, index of PMI SVME increased to 53.5 points in July versus the forecast of 52.5 points.