EUR/CHF – ECB To Consider Slowing Down Asset Purchase
SEP 1, 2021
- Eurozone inflation hits 10-year high
- Double Bottom pattern in EUR/CHF (D1)
Chart 1: EUR/CHF D1 chart
The European Central Bank (ECB) has been adopting an ultra-loose monetary policy to aid the eurozone economy in its recovery from the pandemic. Even prior to the pandemic, inflation in the eurozone has not been meeting the central bank’s 2% target most of the time, leading to the adoption of negative interest rate by the ECB and now the adoption of a revised inflation policy. (Refer to this post to learn more about the revised inflation policy)
However, during the past few months, inflation in the eurozone has been rising. It was reported yesterday that annual inflation in July has spiked to a 10-year high level. Responding to the recent rise in inflation, ECB Governing Council member Robert Holzmann said in an interview that with the current situation the eurozone economy is in, the central bank can start considering a tapering of its Pandemic Emergency Purchase Programme (PEPP) during their monetary policy meeting next Thursday. Another Governing Council member Klaas Knot highlighted in a separate interview that the eurozone’s inflation outlook has justified a tapering of quantitative easing. As a result of the hawkish tone sent out by the two ECB members, euro strengthened against the francs.
At the moment, a Double Bottom pattern in EUR/CHF is close to completion. Our technical indicators are also showing signs of upward momentum. With the strong rise in inflation and the hawkish tone, look for buying opportunities of EUR/CHF if it breaks above the neckline of 1.0840.
Trade Setup for EUR/CHF (D1)
Buy Stop at 1.0870
Upcoming major news that may impact price movement of EUR/CHF
07 September – Eurozone ZEW Economic Sentiment data release at 1700 (GMT+8)
07 September – German ZEW Economic Sentiment data release at 1700 (GMT+8)
09 September – Europrean Central Bank monetary policy decision release at 1945 (GMT+8)
09 September – Europrean Central Bank press conference at 2030 (GMT+8)
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