The Swiss Franc’s monthly move is on track to appreciate relative to the US Dollar for the first time since December of 2020. The move through the first three months of this year against the Greenback saw USD/CHF rise to its highest mark since July 2020, easing pressure on the Swiss National Bank (SNB) to cool its domestic currency intervention following a rampant pandemic-fueled strengthening in CHF.

The appreciation in the Franc against the US Dollar and Euro in 2020 led the Swiss National Bank to increase sight deposits – a mechanism used to influence the Franc’s exchange rate – to record levels in a bid to control the Franc’s furious appreciation. As an export-driven economy, a stronger Franc places downward pressure on prices in Switzerland, which is an undesirable effect against the prevailing macroeconomic landscape.
Intervention by the SNB has since cooled but remains elevated in historical reference. The nation’s currency intervention caught the eye of the United States following the action seen in 2020 when the US labeled Switzerland a currency manipulator. The central bank’s chief, Thomas Jordan, was undeterred, stating the label will have “no influence on our monetary policy.”

USD CHF 20210415 15.34

SNB monetary policy statement did ease off on language surrounding currency intervention. This could be due to the currency manipulator label being slapped on in December, the Franc’s recent depreciation versus the Euro and US Dollar, or a combination of the two.

SNB’s intervention will likely continue, as affirmed by SNB chief Jordan last month. While intervention has cooled slightly, any major strengthening in CHF will likely translate to an uptick in sight deposits. Swiss policy makers will need to carefully balance policy going forward, as a miscalculation or early signaling in tightening policy may drive significant Franc strength. 

 

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The Nasdaq, seems poised to extend its push to fresh record highs as prices slice easily through February high (13900) resistance. With RSI eyeing a push into overbought conditions, the path of least resistance appears skewed to the upside. if support gives way, a decline to the 8-EMA (13734) could be on the table. 

US Tech 100 20210414 11.50

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The Bank of Canada’s hawkish stance in comparison to the majority of its peers has driven the risk-sensitive Canadian Dollar higher against the haven-associated Japanese Yen and Swiss France for the majority of 2021

Attention will be intently focused on upcoming jobs figures out of Canada, given the robust non-farm payrolls figures out of the US earlier this month. Disappointing figures would reinforce the divergence in economic fundamentals between the two countries and probably drive the USD/CAD exchange rate higher. 

USD CAD 20210409 12.11

 

From a technical perspective, the outlook for USD/CAD remains relatively bearish, as prices continue to track below all six moving averages. However, the formation of a bullish Falling Wedge formation suggests that a topside reversal could be on the cards, if buyers can successfully drive the exchange rate back above the trend-defining 55-EMA (1.2628). This could trigger an impulsive upside move to challenge the March high (1.2737), with a convincing break above bringing the 144-EMA (1.2965) into the crosshairs. Alternatively, if the 1.2600 handle remains intact, sellers may regain control of the exchange rate and drive prices back towards the yearly low (1.2365).  

 

GBP JPY 20210413 14.30

Retail traders are increasingly long GBP/JPY and that is sending a bearish contrarian trading signal.

The UK benchmark FTSE 100 index may shrug aside recent coronavirus vaccine concerns, and continue pressing higher as the economy progresses into the next stage of Prime Minister Boris Johnson’s four-stage reopening plan.

The UK’s Markit Composite PMI climbed from 49.6 to 56.4 in March, while the Manufacturing PMI signalled the largest expansion in factory activity since February 2011.

With that in mind, swelling optimism and return to a level of economic normality may pave the way for the FTSE 100 to climb to fresh post-crisis highs in the coming weeks. 

FTSE 100 20210408 13.23

From a technical perspective, the outlook for the FTSE 100 suggests that further gains are in the offing, as prices coil up below key range resistance at 6830 – 6870.

With the index tracking above all six moving averages, and the RSI snapping its downtrend extending from the November extremes, the path of least resistance seems higher. Gaining a firm foothold above 6870 on a daily close basis would probably signal the resumption of the primary uptrend extending from the March 2020 nadir and propel prices to challenge the December 2019 low (7129). However, if range resistance holds firm, a short-term pullback to the trend-defining 55-EMA (6632) could be on the cards. 

 

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