The GBPCHF has remained rangebound through short term trade, moving within a minor wedge formation on the intraday chart. The subsequent break is likely to see extension through the near term, but we believe that a test of nearby resistance is warranted before further declines.
Trading Tip - The GBPCHF has remained rangebound through short term trade, moving within a minor wedge formation on the intraday chart. The subsequent break is likely to see extension through the near term, but we believe that a test of nearby resistance is warranted before further declines. The recommended stop for such a position will have to remain relatively wide, and position size should be adjusted to reflect such a reality. Yet risk reward clearly remains in our favor, with price targets eyed much further away. Event risk will be somewhat limited, but watch out for the key SNB Rate decision on September 13.
Event Risk Switzerland and the UK
UK - The UK has already bypassed its biggest event risk as the BOE left rates unchanged on September 6th. Looking ahead, most economic indicators will simply set the stage for consumer price readings on September 18th. First, PPI figures will provide a gauge of price pressures at the factory gate. The next day, the visible trade deficit is anticipated to widen, as resilient consumption leads imports to greatly outweigh exports. On September 12th, labor market data will likely highlight tight employment conditions and possibly even an increase in average earnings. This data will likely garner the most attention, as a fresh pick up in wage pressures could lead traders to ramp up speculation that the BOE may opt to hike in October.
Switzerland - The SNB is estimated to raise their target range for the three-month Libor rate 25 basis points to 2.25 - 3.25 percent. While headline inflation has remained remarkably tepid at an annualized rate of 0.8 percent, the import and producer price index recently hit 11 month highs, and these undercurrents have not escaped the vigilant eye of policy officials. Furthermore, recent volatility in the financial markets is unlikely to dissuade Roth from normalizing rates, as he said on August 20th, “We hope that volatility stays higher. What we had was not normal, namely, practically no volatility?Markets cannot be a one-way street, or you will get excess.” However, SNB decisions do not typically have a huge impact on the Swiss franc, but if we see the central bank shifts their outlook to reflect that they may stay neutral going forward, the Swiss franc could weaken.
Data for September 9 - September 14 Data for September 9 - September 14
Date UK Economic Data Date Swiss Economic Data
Sep 10 PPI Input/Output (AUG) Sep 13 SNB Rate Decision
Sep 11 Visible Trade Balance (JUL)
Sep 12 Jobless Claims Change (AUG)
Sep 12 Average Earnings (JUL)
Written by David Rodriguez and Terri Belkas, Currency Analysts for DailyFX.com