I go long the USD vs CHF here from 0.843. I give the trade a high probability of 80% to be a winner, lets see!
Once upon a time in an FX universe far, far away... The (supposedly) evil US(D) empire was pushed to the brink of defeat by the CHF rebellion, but "something" suddenly happened... ...life stirred into the USD again and it was sent back to fulfil its task (the bondage of all other currencies).
What that "something" was I will unravel after the (profitable) end of this trade.
USD facts: - The market is pricing in almost 7 rate cuts for 2024 -> this is diametrically opposed to the expectations of the FED members, who expect a total of 3 rate cuts for 2024 - Is the market once again too euphoric here and is frontrunning itself with possible rate cut fantasies? -> I would like to leave this question open for now, as I also expect more than 3 interest rate cuts by the FED in 2024
But the fact is: market expectations can only be fulfilled if either A) there is a recession in the USA and or B) inflation permanently falls below the 2% mark
CHF view: The SNB is currently on Christmas holiday and is probably letting loose while skiing in the Swiss mountains followed by apres-ski party hits. But as soon as the party is over and the hangover is felt all the harder in the new year, the Swiss National Bank will have a heart attack when it looks at the value of the franc.
-> It is now more "overvalued" than it was during the corona crisis, when the SNB had to intervene to actively weaken the CHF - Now these are completely different circumstances under which the SNB has to operate and yet it can be anything but satisfied with the strength of the franc...
More on this later in the comments...
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๐ขThe trade is off to a great start -> nearly 70 Pips in Profitโ ๏ธ ๐ขI expect the trade will hit the target in the coming months, probably in Q2 24โ ๏ธ
๐๐จ๐ญThis week we got the Swiss CPI which could bring some volatility into the market ๐๐จ๐ญInflation data out of Switzerland over the next two months: -> It will rise slightly, as the higher electricity prices are now having an bigger effect and also rental prices, which are adjusted once a year in Switzerland, will also contribute to an increase.
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๐๐บ๐ฒTo continue this strong reversal in USDCHF two things have to be strong today: 1. NFPs๐บ๐ฒ๐ 2. ISM Services๐บ๐ฒ๐
If these both beat consensus forecasts we will see USDCHF at 0.87 by early next weekโ ๏ธ
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๐จ๐ญ๐As forecasted the Swiss CPI saw a rise towards 1.7%. ๐๐ฎAnd as I said the next month will see a rise again this time to 2% or maybe even slightly above๐ฎ๐ -> BUT: This rise will be temporary so the SNB won't act on it. ๐๐จ๐ญI see the SNB cutting rates in June 24๐ข
๐๐บ๐ฒUS Data was more mixed, with the NFPs stronger but the ISM weaker. -> The trade will take some more time, the US CPI data tomorrow will decide how fast we will hit the targetโ ๏ธ
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๐๐บ๐ฒ Both the US CPI (inflation data) and the jobless claims surprised positively today ๐ข -> This is excellent for my USDCHF long in the long term and it should sustainably break the resistance at 0.855 as early as next week โ ๏ธ
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๐ขMy 3rd favourite trade next to my other USDCHF long and my GBPCHF Long is this trade here๐ข
As if pulled by a string (or rather like my drawn arrow ;) it runs straight up and should soon reach the 0.87 mark โ ๏ธ
๐จ๐ญ๐ (Only the Swiss CPI data at the beginning of February could act as a (brief) spoilsport here...)
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๐ขMy USDCHF long took a short breather before another leg towards the 0.91 target ๐ข -> My drawn arrow served as an unbreakable support ;)
๐ขSince he has given me a lot of pleasure so far, I'll let him breath and wait for more economic data to push this further towards targetโ ๏ธ
๐๐บ๐ฒ The US data was brutally strong recently and consequently led to continued USD strength.
๐จ๐ญ๐ Next week's inflation data from Switzerland will definitely bring volatilityโ ๏ธ
โ ๏ธ๐๐ฎ As predicted 2 months ago, Swiss inflation will rise towards 2% or possibly even slightly higher this time ๐ฎ๐โ ๏ธ
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This week we are facing the ๐๐จ๐ญ interest rate decision by the SNB and the ๐๐บ๐ฒ meeting of the US FED -> both are extremely important data points for the USDCHF.
๐๐จ๐ญ The market is expecting the SNB to cut interest rates with a probability of 40%, which, if it actually materialises, would give the USDCHF a decent boost ๐ข
๐จ๐ญ๐ฎ But even if they didn't cut rates, this wouldn't be a long-term disaster for my USDCHF Long because, as I predicted 4 months ago, the SNB will cut rates in June at the latest โ ๏ธ
Quote 13 December 2023: "- My forecast: 1st interest rate cut by the SNB in summer 2024 (March or June)"
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๐๐จ๐ญ And the SNB was actually the first of the G8 central banks to cut interest rates back in March -> the CHF got a good beating๐ฅ๐ฅ๐ฅ (as expected)
-> ๐ฎmy prophecy from December last year came true๐ฎ
! ๐ฎBut that's not all folks๐ฎ ! -> ๐๐จ๐ญIch expect the SNB to cut interest rates again in June๐ฎ -> the CHF train will continue its downwards journeyโ ๏ธ
SNB will Def need to interfere, the SWISS is gone mad and they don't like it at all. Market big boys took the opportunity to move the market knowing SNB are on holiday
PrimeTrading
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@yahoozee147, Exactly, I don't think SNB will be happy with these recent moves of the CHF. Lets wait what they will do in January, I'm sure we CHF bears will like it ;)