Can SNB Sight Deposits Give Us An Edge?
SNB sight deposits can be a useful way to gauge SNB intervention and add additional colour to CHF trade ideas. We have added further SNB (Swiss National Bank) resources on our page here to help you understand and trade the CHF: https://financialsource.co/can-snb-sight-deposits-give-us-an-edge/
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We have a quick question here from Gabriel and Rolando talking about SNB Intervention and how we can use the Sight Deposit data to give us an edge in the market.
As for the first question, on where you can get access to the sight deposit data, I know some sights like ForexLive post it on a weekly basis, but there is also other website that goes into a bit more details, one of them is called SNBCHF.com and has some other useful information about the data as well.
On to the second question, on how we can use it to get an edge in the market, well I suppose we should first figure out whether the sight deposits are even important. And for that we can actually look at a study that was done by Peter Kugler from the University of Basel, he did a paper on the impact that the sight deposits had on the CHF.
His paper indicated that a one percentage increase in the sight deposits leads to roughly a 0.41% depreciation of the Swiss franc against the euro and the dollar. This result seems to be roughly in line with other estimates of the effect of interventions obtained with other models and samples as well.
So, we know the sight deposits show there is an impact in the CHF. Whether it gives us a tradable edge I think it can from a broader context view but not sure whether from a short-term point of view.
Let me explain, if we look at the recent sight deposit data, we can see a very clear increase, which would indicate that the SNB is currently intervening in the currency market, and they of course do that by buying other currencies like the EUR and USD versus the CHF.
But, this data is received weekly, meaning that they have been intervening, but we won’t know on what day they are doing it and not every rush of weakness in the CHF can be attributed to intervention.
Yesterday we had a great example in the USDCHF and EURCHF of what intervention looks like. You usually see a rush of weakness in the CHF and if you take a look at how the market moves you see that constant bid in the market on something like the EURCHF and USDCHF, that relentless buying without easing, that is usually a good example of intervention, as long of course as there isn’t a specific short-term catalyst driving the CHF.
So, yes I think the sight deposits are helpful because they do show us that there are constant intervening in the market, but in the short-term day to day trading I’m not sure how it can really help us to gain an edge, it’s more useful from a swing trading perspective if you want to be long the EURCHF for example, then it’s good to see there is a constant trend of intervention for example.
But on a intraday basis these moves can be tricky, as we don’t know how far they will go and how long they will continue for. The more attractive opportunities from these type of moves, is once you see them happen to look for an opportunity to potentially fade them, but even then, it’s not really something that I would call a high probability trading opportunity.
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