Swiss franc reaches parity with euro: 0.98 next?
The euro-Swiss franc (
EUR/CHF) exchange rate is in the spotlight today as the pair returned to hit parity for the second time since early March.
The eurozone's worsening economic outlook continues to push (EUR/CHF) lower, and the market appears to be giving more credit to the Swiss National Bank's (SNB) ability to continue rising rates to curb inflation.
Yesterday, GfK's
consumer confidence index for Germany predicted a drop from -26.0 to -27.4 in July, a new series low, while today German inflation in June jumped to 7.6% year on year (y/y), albeit to a lesser extent than anticipated (8% y/y).
However, the beginning of the euro's bearish phase versus the franc was triggered by the SNB's unexpected half-percentage-point increase ininterest rates on June 14, when the market expected rates to remain unchanged.
It was the SNB's first rate rise since 2007, after maintaining the rate at a record low of -0.75 percent since 2015, and it signalled a significant shift in monetary policy. It also communicated to the market that the SNB is ahead of the ECB in terms of rate hikes. SNB Chairman Thomas Jordan stated that more monetary policy tightening will be required to return inflation to the central bank's objective of 2%.
This made the franc the best-performing major currency in June, appreciating versus the greenback (
USD/CHF) as well.
Technically speaking, theEUR/CHF pair entered oversold territory as the 14-day relative strength index (RSI) dropped below the 30 level mark. The MACD indicator is not signalling a bottoming out.
This fresh drop to parity level inEUR/CHF does neither reflect a bullish divergence, as the RSI is updating new lows simultaneously with prices, nor a bullish reversal after a double bottom, since the neckline technical figure is absent in the chart.
The nextEUR/CHF support level is now at 0.98, which was reached at the end of January 2015.
[I] Idea written by Piero Cingari, forex and commodities analyst at Capital.com
EUR/CHF) exchange rate is in the spotlight today as the pair returned to hit parity for the second time since early March. The eurozone's worsening economic outlook continues to push (
EUR/CHF) lower, and the market appears to be giving more credit to the Swiss National Bank's (SNB) ability to continue rising rates to curb inflation.Yesterday, GfK's
consumer confidence index for Germany predicted a drop from -26.0 to -27.4 in July, a new series low, while today German inflation in June jumped to 7.6% year on year (y/y), albeit to a lesser extent than anticipated (8% y/y).However, the beginning of the euro's bearish phase versus the franc was triggered by the SNB's unexpected half-percentage-point increase in
interest rates on June 14, when the market expected rates to remain unchanged. It was the SNB's first rate rise since 2007, after maintaining the rate at a record low of -0.75 percent since 2015, and it signalled a significant shift in monetary policy. It also communicated to the market that the SNB is ahead of the ECB in terms of rate hikes. SNB Chairman Thomas Jordan stated that more monetary policy tightening will be required to return inflation to the central bank's objective of 2%.
This made the franc the best-performing major currency in June, appreciating versus the greenback (
USD/CHF) as well. Technically speaking, the
EUR/CHF pair entered oversold territory as the 14-day relative strength index (RSI) dropped below the 30 level mark. The MACD indicator is not signalling a bottoming out.This fresh drop to parity level in
EUR/CHF does neither reflect a bullish divergence, as the RSI is updating new lows simultaneously with prices, nor a bullish reversal after a double bottom, since the neckline technical figure is absent in the chart.The next
EUR/CHF support level is now at 0.98, which was reached at the end of January 2015.[I] Idea written by Piero Cingari, forex and commodities analyst at Capital.com
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