The Swiss franc is the best performing G10 currency today. Part of the move can be reasoned with an overall risk-off attitude in the markets, that favors safe haven assets. However, there are almost more country-specific reasons behind recent outperformance of Swiss currency. Thomas Jordan, Chairman of Swiss National Bank, said yesterday that he is ready to act to get inflation under control. No details on what actions SNB is ready to take were offered but the fact that one of the most dovish central banks in the world has acknowledged readiness to tighten speaks for itself. Money markets currently price in 120 basis point of monetary tightening in Switzerland over the next 12 months. It is less than 160 basis points of ECB tightening but inflation is much less of a problem in Switzerland than in the euro area.
Taking a look at the USDCHF chart at the D1 interval, we can see that the pair has been dropping since the beginning of this week but the plunge accelerated yesterday and today. A daily low was reached today near 23.6% retracement of the upward move launched at the end of 2020. Bulls managed to recover slightly but another test of this area may be looming. Nevertheless, there is still a long way to go until a key support is reached - a lower limit of the Overbalance structure in the 0.9515 area.
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Source: xStation5
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