CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

USD/CHF traders are nervous of being ‘caught short’ ahead of SNB

Article By: ,  Market Analyst
June 20, 2024 4:02 AM

All eyes are on the Swiss National Bank (SNB) and Bank of England (BOE) for today’s interest rate decisions, although it is the former which will likely garner the most attention. The SNB surprised markets with a cut in March and bets were on for another cut in June. Yet the rate of their lowing inflation has declined, GDP was stronger than expected and the central bank seems to have switched tactics with the Swiss franc, saying a weaker currency is a threat (for more) inflation.

 

 

As cutting rates could weaken the currency, it remains debatable as to whether they will have the appetite to do so today. And with the vast majority of futures traders remaining net-short the Swiss franc, a hold could pave the way for short covering and a weaker USD/CHF. Understandably, implied volatility for USD/CHF has spiked ahead of today’s SNB meeting.

 

 

With that said, there has clearly been some short covering this week ahead of the meeting as traders are clearly nervous of being ‘caught short’ should the SNB hold and signal no more cuts. And that could actually create a decent opportunity to short Swiss francs again should the SNB surprise with another cut today. Either way, the meeting in a few hours is one to keep on the radar.

 

 

USD/CHF technical analysis:

The daily chart shows that a bearish trend has been developing on USD/CHF since the May high, when SNB chairman changed his tune on a weaker currency. Prices broke beneath key support including a 38.2% Fibonacci level and the February high. Next support sits around 0.88 near the high-volume node (HVN) of the prior rally. Note that the lower 1-day implied volatility band sits just beneath this level.

 

Even if the SNB hold and potentially send USD/CHF higher, the bias would be to seek evidence of a swing high to short at more favourable prices. Because now we know the SNB do not want a weaker currency, fighting them could provide futile which means rallies could be made to fade.

 

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

 

How to trade with City Index

You can trade with City Index by following these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    • Open an account in the UK
    • Open an account in Australia
    • Open an account in Singapore

  2. Search for the market you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024