The Swiss National Bank is likely to cut interest rates for the third consecutive time.

The Swiss franc continues to strengthen, supported by the weakening of the U.S. dollar amid concerns over the strength of the U.S. economy following a sharp decline in employment reports. Additionally, the latest U.S. inflation announcement, which fell to 2.9%, further pressured the U.S. dollar and led to speculation that the Fed would likely cut interest rates at least twice. Investors expect the first rate cut to occur in September, with a 50% probability.

In Switzerland, the drop in inflation has heightened investor expectations that the Swiss National Bank will cut interest rates for the third consecutive time in September. The annual inflation rate in Switzerland was 1.3% in July, as a slight decrease in energy prices led to lower production costs across various sectors. By industry, clothing and footwear prices saw the most significant decline, while food prices increased slightly by 0.1%, compared to a 0.3% rise in June. On a monthly basis, inflation decreased by 0.2%, a positive sign for the Swiss economy.

Retail sales in Switzerland fell sharply by 2.2% year-on-year in June, lower than the market expectation of a 0.5% increase. This marks the second consecutive month of retail sales contraction, as food sales dropped by more than 3.9%, reflecting household concerns over the continuous rise in food prices, while sales of other goods slightly slowed down.

The Swiss leading economic indicator index rose to 102.7 in June 2024 from 102.2 in May, reaching its highest level since 2022, signaling that the Swiss economy may recover in the coming months. This increase was driven by rising foreign demand. Additionally, the service industry may receive some support as most businesses are expected to grow following interest rate cuts.

The yield on 10-year Swiss government bonds fell to 0.36%, as lower Swiss inflation figures increased expectations that the Swiss National Bank will further cut interest rates in September. Investors also see that the Swiss National Bank is taking a different approach to monetary policy compared to major trading partners such as the United States, which has not yet cut interest rates, and the Eurozone, which must closely monitor inflation to prevent it from rising again.

Techical analysis data (5H)

Resistance: 0.8668, 0.8685, 0.8709

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 0.8603 - 0.8627 but cannot break the support at 0.8627, you may set a TP at approximately 0.8685 and SL at around 0.8586 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 0.8668 - 0.8685, you may set a TP at approximately 0.8709 and SL at around 0.8603 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 0.8668 - 0.8685 but cannot break the resistance at 0.8668, you may set a TP at approximately 0.8603 and SL at around 0.8709 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 0.8603 - 0.8627, you may set a TP at approximately 0.8586 and SL at around 0.8685 or according to your acceptable risk.

Pivot point August 14, 2024 08:24 PM. GMT+7