The franc is starting to gather some solid momentum in the past few sessions, helped by the more dour risk sentiment in trading yesterday – which seems to be continuing to today – and also from a subtle nudge by the SNB in viewing the inflation situation in Switzerland. On the latter, SNB chief Thomas Jordan yesterday said that:
“The SNB is watching inflation closely and is ready to act if inflation solidified in Switzerland.”
That isn’t quite something that they have been explicit about, even though he did try to calm the nerves by adding that “there are no signs of a wage-price spiral just yet”. Still, it bears watching.
The drop in USD/CHF comes after an attempt to break out above parity but that is looking to be short-lived. The drop towards 0.9800 now opens up the potential to test the 38.2 Fib retracement level of the swing move higher @ 0.9732.
But when watching the franc, keep an eye on EUR/CHF as well as the pair is running into sellers after failing to breach its 200-day moving average and the 1.0500 level:
That sets up a potential drop towards the trendline support and the late April lows closer to 1.0200 next, with today’s downside push breaking below the 100-day moving average (red line).