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USD/CHF: Franc is still significantly overvalued _16/05/2016

Technical analysis and trading recommendations -

May is marked by the strengthening of the US dollar in the financial markets. While the world's major central banks soften its monetary policy, the Fed sticks to plan for a gradual increase in interest rates in the United States.

Several Fed officials last week were in favor of continuing the policy of raising interest rates in the United States. Thus, the Federal Reserve Bank of Boston President Eric Rosengren, has the right to vote to vote in the Operations Committee on the open market, he said that if economic data confirm the improvement of the situation on inflation and the labor market in the US, the Fed should continue the gradual completion of enabling policies. At the same time, according to Rosengren, financial markets underestimate the probable number of interest rate hikes by the Fed.

Another long-time opponent of the Fed's soft policy, President Federal Reserve Bank of Kansas City, Esther George on Thursday said that interest rates are at very low levels. Given that the economy is close to full employment, and inflation close to the target level of the central bank's 2%, saving rates in the extremely low level, in her opinion, creates negative conditions in the economy.

Another member of the Fed, the FOMC member and president of the Federal Reserve Bank of Cleveland Loretta Mester also believes that inflation in the US indicates a long-awaited growth. In its view, the weakness of inflation was due to a decrease in prices for energy and other commodities, as well as the strengthening of the US dollar.

On US stock indexes were down last week. There is heightened nervousness in the financial markets in the run-up to the June meeting of the Fed and the UK referendum on membership in the European Union.

Meanwhile, as reported on Friday, the US Commerce Department, retail sales in April rose by 1.3% in comparison with March, the biggest monthly gain since March 2015.

According to managing the Swiss National Bank Thomas Jordan, he said at the beginning of the month, negative interest rates are supporting the economy.
The Swiss franc, according to Jordan, is still "remains significantly overvalued", and the Swiss central bank is ready to intervene in the foreign exchange market to weaken the Swiss franc.

In the current situation it is necessary to exercise caution when opening short positions on the pair USD / CHF, and long positions look preferable.

Monday, 16 May, 2016 / 12:26

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