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Swiss franc price forecast 9 March 2021

2021-03-09

2021-03-09

Franc: there is no need to panic! Forecast as of 09.03.2021Dmitri Demidenko

Belief in the global economy’s bright future is forcing investors to get rid of safe-haven assets, while the rise in US Treasury yields makes the Swiss franc a Forex outsider. Let’s discuss the prospects of [USDCHF][1] and [EURCHF][2] and make up a trading plan.

Fundamental Swiss franc forecast for six months

Unlike gambling or a racetrack, where you bet on the winner, it is possible to bet against the loser on Forex. Such a strategy can be very profitable. Since the beginning of the year, the Japanese yen and the Swiss franc have lost more than 5.5% of their value against the US dollar, and it looks like this is only the beginning. Who needs low- yielding currencies when humanity is on the verge of defeating COVID-19, and the global economy is ready for explosive growth?

During periods of recessions and panics in financial markets, investors strive to preserve their capital and actively buy up safe-haven assets. As soon as the global GDP starts to recover, they, on the contrary, look for opportunities to increase their savings and bet on risky assets. The attitude towards the yen, the franc, and treasuries is changing dramatically, their share in portfolios is shrinking, and sales are happening more often. In this regard, do not be afraid of the rally in US Treasury yields. It is an objective process. However, financial markets are so interconnected that the Treasury yield rally results in the bond yields growth in other countries. Other economies are recovering much more slowly than the US, so the rise in sovereign bond forces central banks to worry.

However, among the regulators, some are satisfied with everything. The Swiss National Bank (the SNB) is among them. Before the pandemic, it was caught between two fires. Local economists blamed the central bank for its inability to accelerate inflation even with the world’s lowest rate of -0.75%. The United States has placed Switzerland on the list of currency manipulators because of its foreign exchange interventions. Franc’s weakening defeats the critics’ arguments. The SNB’s intervention in Forex has declined sharply, as evidenced by the reduction in deposits held by commercial banks in the central bank, while [USDCHF][1] and [EURCHF][2] rapid rally inspires hope for a steady rise in consumer prices.

Dynamics of bank deposits on SNB accounts

Source: Bloomberg.

It’s no secret that at the turn of winter and spring, Forex is following the lead of the global debt market. At the same time, the volatility of the latter has reached its highest level since April, while the Forex volatility remains low. This situation is beneficial for the carry trade and income-generating currencies. If it starts to change, the positions of the [USDJPY][3] and [USDCHF][1] bears will become even more vulnerable, according to Rabobank.

Dynamics of currency and debt market volatility

Source: Bloomberg.

If someone is intimidated by a potential [S&P 500][4] correction and the associated deterioration in global risk appetite and an increase in the safe-have demand, there is no need to panic. In the US stock market, there is a flow of capital from the technology sector to the banking, energy and others, which will grow following the economy.

[USDCHF][1] and [EURCHF][2] trading plan for six months

In my opinion, [USDCHF][1] and [EURCHF][2] downtrends have been broken. The pairs are confidently rising and are likely to continue doing so, creating preconditions for purchases with medium-term targets at 0.985 and 1.165.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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  1. my.liteforex.com/trading/chart?symbol=USDCHF&returnUrl=true
  2. my.liteforex.com/trading/chart?symbol=EURCHF&returnUrl=true
  3. my.liteforex.com/trading/chart?symbol=USDJPY&returnUrl=true
  4. my.liteforex.com/trading/chart?symbol=SPX&returnUrl=true