By Natalie R. – With the recent disenchantment with the EUR in light of the ongoing Euro-Zone debt crisis and the uncertainty regarding the stability of the American economy and sustainability of the national debt, it seem like the world is in search of new reserve currencies. The top two choices appear to be the CHF and CAD.
One sign of the changing times is the fact that both Russia, who has the world’s 3rd largest foreign currency reserve, and China started to diversify their reserve base, likely in order to less dependent on the USD and EUR and begun purchasing the loonie.
The Canadian Dollar has been rising in recent months due to the relatively strong economic standing of the nation. According to the IMF, Canada will have the lowest net debt-to-output ratio among the G-7 countries, and along with the U.S. will have the fastest economic growth this year. It was also the first nation among the G-7 to raise its interest rates from a record low of 0.25% to 0.50% on June 1st. the Canadian Dollar’s rise was also fueled by the rise in Oil prices as well as the demand for the nation’s abundance of raw materials.
The Swiss Franc is another currency which has been gaining much strength recently, particularly against the EUR. The Swiss economy has also weather the economic recession fairly well and has a strong and effective Central Bank. The CHF received a boost this week as the Swiss National Bank dropped its promise to act decisively against an excessive rise in the Franc and said that for now deflation risks have largely disappeared.
While the CAD has experienced a very long rally versus the CHF over the recent months, however, it seems that recently the CHF is beginning to gain some ground versus the Canadian Dollar. With both Currencies cementing their status as alternative reserve currencies it will be interesting to see if this trend will continue, especially in light of the recent decision by the Swiss Central Bank.
After a long decline versus the CAD, the CHF seems to start gaining ground versus the Canadian Dollar and it appears that there is still room for the currency to appreciate further.
– Looking at point 1 it is evident that a bearish cross has formed on the chart’s Slow Stochastic indicating an imminent downward movement.
– Point 2 shows that the pair is trading near the overbought territory indicating a downward correction may be expected.
– Furthermore, looking at the MACD a bearish cross may be expected as it is at the upper border.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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