Another week has flown by and what a disastrous one it has been for the likes of the Turkish lira and to a lesser degree the British pound, but once again it has been a good for the US dollar. Next week should be equally exciting as there are a few important data releases to look forward to, while the ongoing situation in Turkey could bring about further volatility – not just for the lira but the stock markets too.
The U.S. dollar/Swiss franc currency pair completed a three-wave decline within wave Y as part of a bigger complex correction after recent very strong and impulsive reaction up to 1.000 level.
In January 2015, the Swiss National Bank, in a move that took everyone by surprise, decided to remove the then floor of 1.20 in the euro/Swiss franc currency pair exchange rate, despite repeatedly promising to defend that level at all costs and for as long as necessary. Rates literally tanked more than 2,000 pips in a matter of minutes as the franc skyrocketed. Fast forward just a little more than three years...
Ahead of Friday's U.S. jobs report, the U.S. dollar/Swiss franc (USD/CHF) currency pair has been among the strongest dollar pairs. This has been mainly due to a slumping Swiss franc rather than a rallying U.S. dollar. Indeed, the EUR/CHF and GBP/CHF have both been rising while the CHF/JPY has been falling of late. The Swiss franc remains fundamentally weak owing to a dovish central bank.
In the event the data beats expectations then it makes sense to look for signs of dollar strength against currencies which have underperformed, such as the yen. While the likes of the EUR/USD, Swiss franc/dollar (CHF/USD) and the British pound/dollar (GBP/USD) have rallied above their highs last year, the JPY/USD has yet to do the same.
The USD/CHF remains fundamentally supported with the U.S. Federal Reserve being the most hawkish central bank out there, while the Swiss National Bank being among the most dovish.
The Federal Reserve’s latest policy decision this evening is the main macro event for today and quite possibly for the week unless the Bank of Japan comes up with something better tomorrow (unlikely).
