Foreign exchange market update: EUR/CHF – What is next?

0.90 or 1.10?

The franc has quietly but continuously appreciated over the past two weeks. This appreciation was hardly discussed internationally, but is of decisive importance for the future development of the franc.

A de facto end to negative interest rates on savings, solid economic development and a central bank with a clear vision where exchange rates and interest rates should be in the future are probably the most important arguments for the current strength of the franc.

While in the Euro area it is still not clear how high the first rate hike will be, the Swiss National Bank (SNB) clearly communicated its goals and its determination to continue and to ensure a stable environment in Switzerland.

Surprisingly for many, the SNB confirmed that the franc is currently less overvalued than it was a year ago and made clear, that the SNB will step in if a sharp rise or fall of the franc should occur – a similar message to what we have received from the Polish central bank.

If you read between the lines, this could result in a wide trading range of 0.90/0.95 – 1.10 for the next few months.

Support 0.9950

Resistance 1.0350
Resistance 1.0500

The chart below shows the potential trading range of the EUR/CHF rate for the next few months:

Source: TradingView

The European Central Bank (ECB) meeting on July 21st will definitely create some volatility in the market. An interest rate hike of 50 basis points cannot be ruled out, in line with their Swiss peers. A strong franc is currently preventing “imported inflation” and, therefore, a stronger EUR could also be of interest to the ECB.

For more information on the foreign exchange market update, please feel free to contact our forex experts! You can also check our live currency market overview.

Disclaimer:
Please note that this elaboration was completed on 04/07/2022 13:28 CET.
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