The EUR/CHF exchange rate is staying above 0.9300, as sellers haven’t managed to drive it lower yet. Since early May, the pair has been moving in a tight range between 0.9300 and 0.9430, with the RSI currently showing some positive signs at 45.84. Right now, EUR/CHF is around 0.9330, showing some weakness due to a weaker Euro. The pair is also below the 20-day simple moving average of 0.9344, which is acting as a resistance level, hindering upward movements.

Potential Breakout

The Bollinger Bands are tightening, signaling less volatility and hinting at a possible breakout soon. The RSI reflects a bit of buying interest, while the ADX is at 24.02, indicating a strengthening trend, though it isn’t strong enough to confirm a definitive direction yet. If the rate falls below 0.9300, it could drop to 0.9250. However, if it rises above the 20-day SMA, it might reach 0.9430, with more resistance at 0.9500. The Swiss Franc’s value depends on Switzerland’s economy, market sentiment, and the Swiss National Bank’s decisions, making it a stable, safe-haven currency. Its value is closely connected to the Euro due to Switzerland’s ties with the Eurozone. Given the reduced volatility shown by the narrow Bollinger Bands, we believe the current calm hints at a significant price movement ahead. Traders should get ready for a breakout instead of betting on range trading to continue, which aligns with the increasing trend strength shown by the ADX. For a bearish strategy, we should monitor the 0.9300 level as a crucial point. A solid break below this support could justify buying put options aiming for the 0.9250 level. This approach would take advantage of the Euro’s recent weakness.

Upcoming Swiss National Bank Meeting

The likely driver for a rise is the imminent Swiss National Bank policy meeting on June 20th. With markets expecting over a 70% chance of another interest rate cut, a dovish decision could weaken the franc significantly. We would consider buying call options if the pair breaks above the 20-day moving average before the meeting. Recent data supports this outlook, as Swiss inflation in May stayed low at 1.4%, giving the central bank space to cut rates again. This contrasts with the European Central Bank, which has taken a cautious approach, despite a recent rate cut due to ongoing price pressures. This difference in policy strengthens the case for a higher exchange rate. To navigate the uncertainty of the breakout’s direction, we see potential in volatility strategies. Setting up a long straddle—buying both a call and a put option at the same strike price—could be profitable if a significant price movement occurs in either direction after the announcement. This strategy hedges against being caught on the wrong side of a sharp movement. Historically, the Swiss National Bank has made decisive moves that lead to strong market reactions, like the de-pegging event in 2015. This history indicates that any policy decision, or even indecision, can lead to major price movements. Thus, we should stay alert and ready for a sudden end to the current low-volatility phase. Create your live VT Markets account and start trading now.

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