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Swiss Franc Feeling the Heat from the Dollar’s Strong Resurgence

July 21, 2021

The Swiss franc was down In the North American session, USD/CHF is trading at 0.92146, up 0.55% for the day. The US dollar has posted gains across the board against the majors on Tuesday, and the Swiss franc has not been spared from the dollar’s upswing.

The Swiss franc was down sharply in June, sliding 2.94%. USD/CHF started the month below the symbolic 90 level and shot up to 0.9260. The Swiss National Bank (SNB) has taken on itself the role of ensuring that the franc does not appreciate to an extent that it harms the economy, which is highly dependent on exports and tourism. The SNB hasn’t hesitated to intervene in the currency markets to curb the franc’s value, although the Bank hasn’t had to intervene this year nearly to the extent that it did in 2020 when the SNB sold some 110 billion francs in order to prevent the USD/CHF from dropping to low for the bank’s liking.

With the ECB holding a critical policy meeting on Thursday 22/7, we could see some movement from EUR/CHF around the time of the meeting. ECB meetings are usually quiet events as far as the markets are concerned, but this time, the ECB is expected to implement significant changes in policy. The ECB presented a strategy review last week and ECB President Christine Lagarde said that there would be a review of forwarding guidance to align it to the strategy review. This means that we could see some important changes to forward guidance at the meeting.

The strategy review raised the inflation to 2% (up from “below, but close to 2%) and also stated that the central bank would accept “a transitory period in which inflation is moderately above target.” These changes are likely to be incorporated into the bank’s forward guidance and it will be interesting to see how the markets react to these moves.

USD/CHF is testing resistance at 0.9227. Above, there is resistance at 0.9258

On the downside, the pair put pressure on 0.9141 earlier in the day. This is followed by support at 0.9086.

 

 

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