According to Statistics Sweden (SCB), the country registered a y-o-y growth rate of 4.2% in Q1 2016. The booming construction sector, an increase in household consumption, and a rise in public investment contributed to the strong economic growth. Finance Minister Magdalena Anderson stated that the economy is growing at a stable pace and there are no signs of overheating.
Considering the official growth rate of 2.1% and 1.6% in Britain and Germany, the reported expansion is very impressive. In the case of Switzerland, the economy grew only by a paltry 0.1% in the first quarter of 2016. The analysts expected a growth rate of 0.2%.
In June, Switzerland reported a decline in the inflation rate by 0.4%, compared to the similar period last year. The 20th consecutive month of deflation has tremendously increased the pressure on the Swiss National Bank (SNB). If the Swiss Franc strengthens further, then it will cause a huge decline in exports. Taking this into account, the SNB announced that it will intervene in the currency market to avoid strengthening the Swiss Franc. Within a week after the results of the Brexit referendum was announced, the SNB intervened in the currency and equity markets for an estimated CHF6 billion Francs. The SNB has cautioned that it will intervene as and if necessary. Thus, it is absolutely clear that the CHFSEK currency pair will remain bearish until the SNB withdraws its decision to intervene in the currency markets.
The CHFSEK pair continues to move within the declining channel. The chart also reveals that the currency pair is unable to break the upper band of the channel. Furthermore, the stochastic reading of 96 indicates that selling may begin soon.
Thus, as of now, a Forex trader should only look at the option of taking short positions. The short entry can be done at 8.73, with a stop-loss order above 8.82. The short position can be winded when the price declines to about 8.08.
A binary trader should buy a one-touch put option contract to capitalize on the decline of the CHFSEK pair. The recommended strike price for the trade is 8.45 or higher. The trader should also opt for a contract expiry date in the first week of August.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
