Daily Technical Report
USD/CHF has printed a lower high at 0.9567 which now opens up a re-test to 0.9306. Below this level would then greatly increase the probability of a return to test the 200 day moving average.
In the absence of the SNB, it is anticipated that a return to 0.8712 (the current location of the 200 day moving average) would be possible, ahead of a further phase higher.
When formulating strategy for USD/CHF a close eye needs to be kept on EUR/CHF, where the threat of SNB intervention is ever present. The ability of the SNB to successfully maintain its floor in EUR/CHF at 1.2000 is key. Despite the recent pullback in Italian yields it is still anticipated that 10 year Italian sovereign yields will return to the 7.500% region.
10 year yields in Spain and Italy are currently trading at 5.117% and 6.545% versus 6.478% and 7.355%, before the US Dollar based swap agreement. These same yields were trading at 5.203% and 6.542% respectively yesterday.