USD

USD CHF - Daily Currency Future 13th March 2009

USD CHF - Daily Currency Future 13th March 2009

Yesterday’s sharp rise in the usd chf was largely as a result of the action taken by the Swiss National Bank in order to combat the threat of negative inflation, and the following is an excerpt from their press release:-

“The economic situation has deteriorated sharply since last December, and there is a risk of negative inflation over the next three years. Decisive action is thus called for, to forcefully relax monetary conditions. Against this background, the Swiss National Bank (SNB) is making another interest rate cut and acting to prevent any further appreciation of the Swiss franc against the euro. To this end, it will increase liquidity substantially by engaging in additional repo operations, buying Swiss franc bonds issued by private sector borrowers and purchasing foreign currency on the foreign exchange markets. The SNB is lowering the target range for the three-month Libor by 25 basis points, narrowing it to 0–0.75%, with immediate effect. It will use all means at its disposal to gradually bring the Libor down to the lower end of the new target range, i.e. to approximately 0.25%. Thus, the Libor now has a narrower target range of 75 basis points, compared with 100 previously. With these exceptional measures, the SNB is helping to cushion the effects of the economic and financial crisis, with the aim of limiting the risk of deflation. The SNB has a mandate to ensure price stability, while taking economic developments into account. This mandate, the National Bank will – as it has in the past – base its decisions on an inflation forecast.”

Following the news the usd chf contract moved sharply higher violently breaking out of the narrow trading range of the last few weeks, and finishing the day with an extremely wide spread up bar, which just failed to breach the 1.20 level on the day. Today’s price action has been muted in contrast, but with the congestion area now cleared, and with prices well above the moving averages, we should see a move higher in the next few weeks to retest the highs at 1.21 once again, with the support level below acting as support.