The Swiss franc, despite pressure due to problems with the largest bank Credit Swiss, continues to strengthen against an even weaker dollar, which also survived the turmoil in the banking sector. After the emergency merger of two large banks in Switzerland, the franc was in danger of completely losing the status of a safe asset. The reputational damage has certainly been done, but since the bankruptcy did not occur, this incident may be in the past, and the confidence in the franc quickly return.
Over the past week, the franc received support with the increase in the interest rate by the Bank of Switzerland to 1.5%, with the prospect of further growth. The potential remains, although the attractiveness of the Swiss banking sector was precisely thanks to the low cost of borrowing.
Despite the strong macroeconomic reports in the US, this did not help in the confrontation with the franc. Why? - We believe there are several reasons. First of all, there are less prospects for an increase in the FED rate, which is already at its peak, and a maximum of +25 points can be expected. Also, investors are confused by the sale of US debt bonds by China, which puts pressure on the USD.
We know that the Swiss regulator does not like a strong franc and may resort to foreign exchange intervention while the rates are approaching absolute lows. At the same time, we do not see any other way but a further decline. Technical analysis indicators also point to the continuation of the downtrend. After all, now is the best time for the franc to test multi-year lows so that we can buy USD in the future at an even better price, but now we open new Sell trades, following the signals of the oscillators, and expect profits in the short term perspective.
