Those of you who've attended my webinar and followed my analysis may remember me saying that I have not traded a Swissy pair for a few years, due to it previously being pegged to the Euro and of course the day of extreme volatility in Jan this year.
However the main reason I am willing to overlook my own personal rule is because the Swiss Franc has weakened considerably since the intervention from SNB (who do not want a strong Franc). The weaker their currency is the less reason they have to intervene.
However this week both RBNZ and SNB have rate decisions. The markets are generally expecting RBNZ to cut from 2.75% to 2.5% but I have a sneaking suspicion that they may stand pat this week.
Previous statements do indeed say that both the New Zealand Dollar their overnight cash rate will (and have to) come down but it is also possible they will let FED raise rates first and look to cut in the New Year. Business confidence also expanded for a second consecutive month whilst GDT prices advanced to break the gloomy, bearish trend. In November inflation expectations remained at 1.9% whilst PPI (consumer inflation) was also unexpectedly higher at 1.6% vs 0.1% expected. These forces combined may be enough for RBNZ to avoid cutting rates for now and to wait until next year.
If both Central Banks hold rates steady then NZDCHF is poised to trade higher. The fact that ECB only cut their negative interest rates to -0.3% takes the pressure off of SNB to lower their rates further. But if, for whatever reason, SNB to go further into negative rates (currently at -0.75) then the yield differential between Switzerland and New Zealand will provide tradres more reason to consider it for the carry trade as long as markets can maintain a -on environment.
Technically we remain within a bullish channel which was created from the price shock last Jan. Friday's bullish candle confirms a bullish piercing line, respected 0.66 support and monthly pivot, whilst also remaining above the cluster of moving averages (including the 200day).
Currently meandering around the monthly pivot we could consider a market order to go long to anticipate the channel holding as support (and RBNZ keeping rates unchanged).
Conversely we could use the break of the bullish channel as a longer-term sell-signal but, due to the yield differentials, we could see further gains ahead, especially whilst SNB remain in negative yield territory.
NZDCHF could pop higher this week around Cash Rate Decisions
This week both SNB and RBNZ announce their rate decisions to the markets, making NZDCHF an ideal currency cross to consider.