Authored by Stanislav Bernukhov, Senior Trading Content Specialist at Exness.
The FED’s week hasn’t brought any significant change in the markets: the US interest rate was left unchanged, with a projection of two rate cuts for 2025, which means no surprises for now. Jerome Powell had stressed the resilience of the labor market of the US now.
The interest rate from BOE was also left unchanged, matching the expectations.
While no surprises have been visible from the monetary policy standpoint, the geopolitical situation remains to be the most destabilizing factor for all asset classes; traders are trying to weigh statements of the US president Donald Trump on the situation in the Middle East and figure out whether the US will interfere or not.
That had caused a bearish reaction for Crude oil futures, thus eliminating some geopolitical risk premiums. The overall open interest hasn’t grown for WTI oil futures – every day within a week it was declining. Gold had remained stable, and the overall volatility across the board was muted too: the “safe haven” narrative slows down the momentum, as summer markets stagnate amid absence of drivers.
The interesting situation, however, might be building on a Swiss Franc. The SNB had cut interest rates by quarter a point (exactly as anticipated) and brought monetary policy to zero. At the same time, the net position for speculators had reached the peak, indicating the “safe haven” narrative in play. Options for “risk-reversals” (bearish bets for EURCHF) have reached the new minimum, which might point to a local bottom.
In combination with the interest decline (although anticipated), this situation might provide substantial pressure for CHF should capital flows turn from safe haven assets back to cyclical assets.
Bullish bets for non-commercial traders for Swiss Franc futures. Source: Bloomberg.com
EURCHF
After losing volatility in a tight trading range for several weeks, EURCHF might be ready to break. Usually with the net position of speculators at the new peak, the short-term perspective for the trend might be up, while the intermediate-term picture might point to a reversal.
After dropping the interest rate from SNB, Swiss Franc loses its attractiveness as a safe haven asset, and the narrative might switch to carry trade, which might weaken the EURCHF.
As the price still holds inside of the range despite of monetary policy easing, we can conclude that it may be ready for the breakout soon as shown at the chart.
EURCHF, Daily chart. Source: Exness.com
XAGUSD
After the initial breakout, Silver doesn’t seem to hold the momentum, and it doesn’t get the support for Gold either. Considering the position of the price touching the area above the 20-day Bollinger Bands a week ago, it’s possible to observe it sliding down further in a search for buying liquidity.
The spread between Gold and Silver is relatively low, which can make it rotate back (supposedly in a form of declining silver price).
The engulfing candlestick pattern confirms this scenario.
