Swiss National Bank Grabs The Spotlight

While the FOMC failed to excite the market, it was SNB’s currency intervention which provided the day’s fireworks. Overall, the Fed stuck to the company line (perhaps a slight hawkish lean) stating “conditions in financial markets have generally improved in recent months” and “the pace of economic contraction is slowing” in regard to growth. In regard to inflation, stated “substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.” And finally in order to temper the markets’ tightening expectations stated “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

The accompanying statement interestingly enough failed to mention an exit strategy, which suggests the FOMC members believe that recovery is still far off. The ECB first 12-month refinance operation went well, with 1121 banks asking for EUR442bn (a massive amount of liquidity). The key question is what the banks will do with the new capital. The ECB hopes that banks will lend the money out, easing credit conditions. However, we have our suspicion. In fact we are concerned that the large demand is representative of weak balance sheets rather than demand from consumers. But the real drama was in Switzerland .

While unconfirmed by the SNB, we have heard from a few banks that they saw official names buy EUR and interestingly USD, against the CHF. The EURCHF jumped from 1.5013 to 1.5381 while the USDCHF climbed to 1.1022. In the past, post-intervention sell off in the CHF has been short lived and give 1. the SNB is only looking to halt appreciation and 2. CHF is still undervalued against the EUR we expect yesterday’s move to be temporary. While the SNB is keen on easing monetary conditions through currency intervention helping to fight off deflation, we don’t expect the SNB to step right back in until the 1.5000ish level. On the docket today is US GDP, PCE and initial jobless claims.

EurUsd initial support at 1.3830 ahead of 1.3750. Recovery through 1.4178 required to re-instate the bullish tone.

GbpUsd a break above 1.6660 necessary to reinforce the bullish theme. heavy tone and currently trading near horizontal support at 1.6189.

UsdJpy Looking for 97.20/30 area to provide strong resistance on the topside today, with bearish moving averages still to the fore. 94.40 supports

UsdChf the SNB changed the game. Rapid rise from 1.0633 has cleared 1.0986, targets 1.1030 near term key Fibonacci resistance. Remains vulnerable below 1.1264 key resistance. <!–

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