CHF: Swiss Franc continues to reach new historic highs

At the Forex currency market Swiss Franc rate continues to be strong on Tuesday. Yesterday, the currency has shifted up historic highs once again and now its peak is at the level of 0.7482.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF, and is going down, giving a sell signal. Stochastic Oscillator is still in the oversold zone and maintains a sell signal.

Forex recommendations: in case of breakdown at the level of 0.7500, the pair USD/CHF will go to 0.7490 and to new highs of 0.7470. If downward breakdown does not take place, the pair will consolidate at the current levels.

The data released yesterday showed that unemployment rate in Switzerland was maintained at the level of 3.0% in July.

Today, investors will await the release of the consumer confidence index in Q3.

As we expected before, Swiss National Bank will have to confront a huge number of currency investors, who try to hedge risks in the Franc, due to the increasing instability in the market, the demand in CHF has risen again.

Due to the aggravated situation in the U.S. economy, agency S&P has downgraded rating of the country by one step and gave the U.S. a “negative” forecast. This, along with the spreading of debt problems of the Eurozone towards Italy caused the rise of investors’ interest in safety currencies.

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.

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.

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.
Now, it will be interesting to know the volume of the infused liquidity in the market by SNB to assess how firm the Bank’s intention is to conduct intervention.