Fundamental Analysis:
Looking ahead to next year, with Swiss consumer prices now back below 2% (the SNB is the only major central bank currently hitting its inflation target), the need for the central bank to keep buying Francs will diminish. In addition, despite the renewed talks about rate cuts in the major economies, starting with the U.S Federal Reserve, the yield differential between Switzerland and the rest of the world will come back into focus now, keeping the CHF at a disadvantage. Before the rate hikes of the past couple of years, nominal rates were historically low, so the advantage was negligible; this is not the case anymore today. As a result of this, we believe that the Swiss Franc appreciation should come to an end soon, even if we don’t see a very big decline against the U.S Dollar in particular.
Technical Analysis:
Our preferred wave count is that a five-wave decline unfolded from October 2022 to July 2023 and ended at 0.8551, and should be followed by at least a three-wave A-B-C advance, which we are currently in. Wave (A) ended at 0.9245, Wave (B) has either ended at 0.8666 or is ending soon, and Wave (C) should then follow towards 0.9350 and 0.9528. This wave count will be invalidated on a confirmed break below 0.8551.
Looking ahead to next year, with Swiss consumer prices now back below 2% (the SNB is the only major central bank currently hitting its inflation target), the need for the central bank to keep buying Francs will diminish. In addition, despite the renewed talks about rate cuts in the major economies, starting with the U.S Federal Reserve, the yield differential between Switzerland and the rest of the world will come back into focus now, keeping the CHF at a disadvantage. Before the rate hikes of the past couple of years, nominal rates were historically low, so the advantage was negligible; this is not the case anymore today. As a result of this, we believe that the Swiss Franc appreciation should come to an end soon, even if we don’t see a very big decline against the U.S Dollar in particular.
Technical Analysis:
Our preferred wave count is that a five-wave decline unfolded from October 2022 to July 2023 and ended at 0.8551, and should be followed by at least a three-wave A-B-C advance, which we are currently in. Wave (A) ended at 0.9245, Wave (B) has either ended at 0.8666 or is ending soon, and Wave (C) should then follow towards 0.9350 and 0.9528. This wave count will be invalidated on a confirmed break below 0.8551.