Trade Of The Week: EURCHF to challenge major resistance?

• EURCHF bullish on D1/W1 charts

• Big week for minor currency 

• Watch out for EU data + SNB decision

• Key level of interest at 0.9640

• Bloomberg model: 76% chance EURCHF – (0.95270 – 0.97098)

Our focus falls on the EURCHF which could be rocked by the EU data dump and Swiss National Bank (SNB) rate decision this week.

The minor currency pair remains bullish on the daily/weekly timeframe with prices approaching a key resistance level at 0.9700.

Note: The last time the EURCHF secured a weekly close above 0.9700 was back in July 2023.

With volatility likely to remain the name of the game for the EURCHF, a major breakout could be on the horizon.

Here are 3 factors to keep an eye on:

1. SNB rate decision 

The SNB is widely expected to keep interest rates unchanged at 1.75% on Thursday. So, investors will direct their attention towards the policy statement, news conference, and CPI projections for clues on the central bank’s next move.

Given how economic growth held steady and 0.3% in Q4 and inflation edged down to 1.2% in February, the SNB is expected to move ahead with its first rate cut at the next policy meeting in June.

Traders are currently pricing in a 25% probability of a 25-basis point SNB cut in March with a cut fully priced in by June 2024.

• The CHF could weaken if the SNB strikes a dovish note and signals that the next move will be a rate cut. Such an outcome may push the EURCHF higher.

• Should the SNB sound more hawkish than expected and offer no fresh clues on rate cuts, this may support the Swiss Franc, dragging the EURCHF lower as a result.

2. Key EU data 

This is a week packed with top-tier economic data from Europe which could impact bets around when the ECB will start cutting interest rates in 2024. 

On Monday, the Eurozone inflation in February was confirmed at 2.6% year-on-year, down from the 2.8% seen in January. While this was the lowest rate in three months, it’s still above the ECB’s target of 2%. It will be wise to keep a close eye on the Eurozone consumer confidence and PMIs along with top data on Germany, the largest economy in Europe.

Traders are currently pricing in an 80% probability of a 25-basis point ECB cut by June with a cut fully priced by July 2024. 

• Should overall data from Europe support expectations around the ECB cutting interest rates by Summer, this is likely to weaken the euro – sending the EURCHF lower.

• A positive set of economic reports that push back rate cut bets may support the EUR, sending the EURCHF towards the 0.9700 resistance.

3. Technical forces

The EURCHF is respecting a bullish channel on the daily timeframe and trading above the 50, 100 and 200-day SMA.

• A solid breakout and daily close above 0.9640 may open a path towards 0.9700 – a level not seen since July 2023.

• Should prices slip below 0.9590, this could trigger a selloff towards the 200-day SMA at 0.9558 and 0.9530.

Bloomberg’s FX model points to a 76% chance that EURCHF will trade within the 0.95270 – 0.97098 range over the next week.