EUR/CHF Hits a Nearly 3-Year Low as SNB Intervention Odds Fall
Matt Weller, CFA, CMT January 14, 2020 2:03 PM
With today’s headlines allaying fears of imminent intervention, we’ve seen EUR/CHF drop to its lowest level in nearly three years...
“Don’t fight in the North or the South. Fight every battle everywhere, always, in your mind. Everyone is your enemy, everyone is your friend.” – Petyr Baelish, Game of Thrones
As many of us recall, the ending of the HBO’s wildly popular Game of Thrones was panned for nonsensical plot points and dialogue, including Littlefinger’s bizarre comment above.
Apparently, a similar “chaos is a ladder / fight every battle everywhere” philosophy pervades the US’s approach to currency manipulators as well. A day after the Trump Administration removed it’s “currency manipulator” label from China, it added Switzerland back onto the its manipulation watchlist. As any student of European history will tell you, it’s difficult to pick a fight with the historically neutral Swiss!
In any event, the Swiss National Bank was quick to respond that it only intervenes into its currency for monetary policy purposes and not for export advantage. In the words of the Swiss International Finance Secretary, “It's to be stressed that Switzerland doesn't manipulate its currency in any way to achieve an adjustment in its balance of payments or an unjustified competitive advantage.”
Turning our attention to the EUR/CHF cross, rates fell sharply through the middle of last year before stabilizing in the 1.0815-1.1050 range through Q3 and Q4. In total, the bounce off 1.0815 support didn’t even hit the shallow 38.2% retracement of the summer’s drop, signaling that the momentum remained with the bears. With today’s headlines allaying fears of imminent intervention, we’ve seen EUR/CHF drop to its lowest level in nearly three years:
Source: TradingView, GAIN Capital
Moving forward, the technical bias on EUR/CHF remains bearish, with potential for an extension toward the late 2016 / early 2017 support zone starting in the mid-1.0600s. Only a break out of the near-term bearish channel back above the key 1.0815 would shift the pair’s near-term technical bias back to neutral.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.