Following the Reserve Bank of New Zealand, the Swiss National Bank also had an uneventful policy meeting on Thursday. The central bank kept interest rates at record low of 0.0%, calling this policy “justified”. Officials link it to inflation, which is projected to stay at 0.2% in 2014. This means that interest rates will most likely remain flat for at least another year. The bank did not mention strength of the CHF versus currencies other than the Euro, but confirmed its readiness to maintain the self-imposed floor of 1.20. There was no mention of negative rates, but based on previous statements, the SNB could introduce them if it is unable to defend the EUR-CHF exchange rate. Perhaps the bank will have more to say in next month, if volatility in currencies increases as it often does in January.
The USD-CHF rebounded on Thursday, with or without influence of the SNB (who really knows?). At under 0.89, I think this downtrend is overextended and ready for at least. Its daily chart shows inviting candlestick development, hammer followed by an engulfing line. I bought at 0.8888 with a reasonable objective of about 0.90. This pair has not been very volatile, so even if correct, this trade could take several days.
Meanwhile on Friday, I will concentrate on short-term trading at the start of the London session. The idea is to look for small breakouts in the majors, with targets in the range of 30-40 pips. Most likely candidates are the EUR-USD, GBP-USD and AUD-USD.
Mike K.