ECB is widely expected to raise interest rates for the ninth time in a row today. The main refinancing rate will be lifted by 25bps to 4.25%. Deposit rate, once negative will be raised by 25bps to 3.50%. The question remains on what the central bank would do next, and whether there would be further tightening in September. But it’s unlikely for President Christine Lagarde to provide any concrete answer, other likely pointing to incoming data and the new economic projections to be prepared before next decision.
EUR/CHF’s decline from 1.0095 is showing sign of downside acceleration this week, by breaking through near term falling channel support, and as displayed in D MACD too. Next target is 100% projection of 0.9995 to 0.9670 from 0.9840 at 0.9515. Sustained break there will put 0.9407 (2022 low) in focus. Regardless of any recovery, outlook will remain bearish as long as 0.9670 support turned resistance holds.
Meanwhile, it should also be noted that prior rejection by 55 W EMA keeps medium term outlook in EUR/CHF bearish. That is, the down trend from 1.2004 (2018 high) is in favor to continue. Firm break of 0.9407 would set the stage for 61.8% projection of 1.1149 to 0.9407 from 1.0095 at 0.9018 in the medium term. The unfolding of this bearish scenario would depend significantly on the evolution of increasing recession risks in the latter half of the year and the impact on timing of the first ECB rate cut.
