RBC Capital Markets provides a comprehensive look into the Swiss franc (CHF) as the Swiss National Bank (SNB) gears up for its third quarterly meeting of the year. The financial giant discusses its favorite CHF trade and offers an analysis of positioning in CHF pairs, notably USD/CHF.

Key Points:

• SNB Meeting Anticipation: The forward curve is currently discounting a 40% chance of an interest rate hike by the SNB. RBC views this as a high estimation and advises investors to view any CHF dip as a repositioning opportunity.

• Favorite CHF Trade: RBC highlights that its preferred CHF trade for the year has been long CHF/JPY, expecting this to have more room to run.

• USD/CHF Positioning: The market has built up long positions in USD/CHF (+42%), in line with a general build-up of USD longs. RBC notes that EUR typically outperforms CHF as a funding currency according to their carry barometer.

• Technical Analysis: USD/CHF has seen a bullish channel breakout above 0.8828, targeting further gains with resistance at 0.9017 and 0.9148. Any pullbacks to 0.8808 and 0.8699 should attract buying interest.

Analysis:

For Forex Traders:

• Currency Strategy: The bullish channel breakout in USD/CHF suggests that traders should keep an eye on specified resistance and support levels. Long USD/CHF positions may be favorable for the time being, but keep in mind the potential for a shift around the SNB meeting.

For Investors:

• Investment Implications: A 40% chance of a rate hike may lead to market volatility, making it crucial for investors to stay vigilant, particularly those invested in Swiss assets or currency pairs involving the CHF.

For Economists:

• Monetary Policy: If the SNB opts not to raise rates, it could add another layer of complexity to the global monetary policy landscape, especially considering the stance of other major central banks.

RBC's analysis provides key insights into the CHF landscape, taking into account potential SNB policy changes, market positioning, and technical levels. Traders and investors might find value in adjusting their strategies accordingly.