Swissy Strengthens As Economic Uncertainty Loosens

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In the Wednesday session, the Swissy trades calmly. The USD/CHF exchange rate is currently at 0.9220, down 0.17 percent on the day.

Economic uncertainty appears to have abated a little Wednesday, with European markets and US futures showing signs of recovery. Both the yen and the dollar have entered sideways consolidations. However, there is no apparent backing in Australia or New Zealand, which are also under pressure. In the meantime, the Swissy and the Canadian Dollar are leading the way and strengthening substantially. However, traders are cautious in general, since a flurry of central bank statements will begin Thursday.

The Federal Reserve will be in the limelight today, as the FOMC meets for a crucial policy meeting. Expectations are strong that the Fed will announce whether or not it will begin tapering at its November meeting, which could lead to yet another twist in the taper-on-taper-off drama.

Several times, Fed Chair Powell has indicated that there is no relationship between a decision to trim and a rate hike. Still, the markets are paying close attention to any hints regarding rate changes, so the dot plot at today’s meeting might be a market mover.

The US dollar could gain a major boost in the North American session if the dot plot indicates that FOMC members have brought forward predictions of a rate hike. In stark contrast to the FOMC meeting, the markets do not expect any interesting monetary policy moves during the SNB policy meeting on Thursday. The SNB’s deposit rate of -0.75 percent (the lowest of any major central bank) will remain unchanged, and no policy changes are planned. In an interview earlier this month, SNB Vice President Fritz Zurbruegg stated that the negative rate policy was necessary to prevent the Swiss franc from appreciating and stifling economic growth.

Taking a page from the Fed’s playbook, Zurbruegg claimed the inflation surge was just temporary and that inflation would remain low in the medium run. Despite other central banks raising or moving in that direction, the SNB is going about its business as normal.

0.9100 Mid-August Low Provides Solid Support for Swissy

At 0.9337, the Swissy continues to retreat from the 2019-2020 decline. It’s returned to its former range of 0.9100-0.9274. To relieve immediate upside pressure, the pair must drop below the 55-day moving average at 0.9167. The 0.9100 mid-August low and the 200-day MA at 0.9098 provide a solid support for the 2021 upswing at 0.9047.

Just before the major drop from the 2019 high and retracement resistance at 0.9356/77, the USD/CHF has been capped. This means a new higher-level range is likely to emerge, with 0.9356/77 likely to act as a stumbling block and define the range’s top until the USD forms a larger base, and little meaningful opposition if a breakthrough above here occurs until the 0.9473 high.