Switzerland to Charge Forward with Currency Intervention

The Swiss National Bank has been intervening in the currency market since March. Unlike other central banks who have failed at intervention, the SNB has done a fantastic job keeping EUR/CHF above 1.50 for the past 3 months. The SNB focuses on EUR/CHF over USD/CHF because the European Union is by far the country’s largest trading partner. The Swiss National Bank has a monetary policy decision on Thursday and interest rates are expected to remain at 0.25 percent. If they could, Switzerland would probably cut interest rates. The State Secretariat for Economic Affairs just released their latest economic forecasts. GDP growth is expected to contract by 2.7 percent this year compared to a prior forecast of -2.2 percent. The economy is also now expected to shrink instead of grow in 2010. Therefore the SNB will not be abandoning their loose monetary policies anytime soon.

However for currency traders, the more important takeaway from the meeting will be the Swiss National Bank’s reluctance to rescind its commitment to currency intervention. If that is the case, then current levels may present a buying opportunity for range traders as the SNB is likely to actively maintain this incredibly yawn inducing range in EUR/CHF.

Meanwhile the EUR/JPY trade that I posted earlier this week has hit its target of the first standard deviation Bollinger Band. The 50-day SMA now at 132.30 will provide some support but if that level is broken, we could see a move down to 130.

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