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Swiss Franc rate is traded slightly upward at the Forex currency market on Tuesday morning; which, however, looks more like technical correction for the pair USD/CHF after several days of steady upward movement.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF, and is going down, giving a sell signal, while volumes are decreasing. Stochastic Oscillator has reached oversold zone and continues to go up, giving a buy signal.

Forex recommendations: in case of breakdown at the level of 0.7835, the pair USD/CHF will go to 0.7850 and 0.7890. If upward breakdown does not take place, the pair will consolidate at the current levels.

It became known this week that producer prices and imports prices in Switzerland declined by 0.7% m/m (-0.5% y/y) in July against the fall of 0.6% m/m in June. In addition, consumer confidence index in Switzerland fell to -17 points in Q3 against the forecast of -5 points. The data released earlier showed that unemployment rate in Switzerland remained at the level of 3.0% in July.

However, the data released previously has been of a seasonal character and does not indicate recession of the economy. Index of leading indicators KOF in Switzerland fell to 2.04 in July, while the forecast had been 2.11.  The data released earlier showed that trade balance in Switzerland totaled +1.74 billion francs in June against preliminary revised level of +3.25 billion francs. According to statistics released earlier, level of retail sales in Switzerland rose by 7.4% y/y in June against the revised level of -3.9% y/y in May. In addition, index of PMI SVME increased to 53.5 points in July versus the forecast of 52.5 points.

Long positions in Franc continue to fall at Forex market; investors fear that SNB can take more drastic measures, as it has warned earlier that it will adjust the rate of Franc to the Euro, if speculations with the exchange rate of Swiss currency will not reduce in volume.

We would recall situation of last week: Swiss National Bank intervened into the trades at the currency market; judging by the forwards sector, SNB continued to infuse liquidity at the trading floors to curb the growth of the Franc. We would remind that earlier, Swiss national Bank had restricted three- month Libor rate to 0-0.25% (it had amounted to 0-0.75% previously). They also stated that increasing rate of the Franc is a negative factor for the national economy; therefore Libor rate will tend to zero and the SNB is going to infuse liquidity into the market in the nearest future to “chill out” the Franc. SNB named the threat to economic progress and price instability as main arguments.
 
According to the representative of SNB Mr. Jordan, Central Bank of the country is prepared to take proactive measures to maintain financial stability in the market in the future; however the issue of the interest rate increase is not going to be discussed at the moment. In addition, short- term risks to price stability have a downward trend.

At the same time Mr Dantin stressed that Franc is still significantly overvalued; however the idea of pegging of Franc to the USD is difficult to implement, and therefore is not feasible at the moment. According to Dantin, present accommodative policy is completely justified.

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