EUR/CHF Stalls At Key Support Whilst Signs Of SNB Intervention Are Growing

Despite the nice downtrend on EUR/CHF, we urge caution amid signs of SNB’s FX intervention.

Despite the nice downtrend on EUR/CHF, we urge caution amid signs of SNB’s FX intervention.

Focussing purely on the technicals, EUR/CHF has provided a decent bearish trend on the daily chart, having shed over -5.5% since its April high. The 20-day eMA is capping as resistance and Friday’s bearish engulfing candle suggests a swing high is in place. With prices now consolidating above support (the June 2017 low), traders could take a break beneath 1.0835 as a sign the trend is set to continue. Or, for the more daring, traders could fade into minor rallies below Friday’s high to increase reward to risk-potential (the obvious caveat being, it may not break lower and instead break higher).

However, given there are signs that SNB are once again intervening in their currency, we urge caution around current levels. SNB’s sight deposits are a proxy for their levels of intervention, which they tend to perform when the Swiss Franc becomes too strong relative to the Euro. We can see that the weekly change of sight deposits has risen to levels not seen since early 2017, when the Swiss Franc was also strong relative to the Euro (the chart depicts CHF/EUR to better show Swiss Franc strength).

If the franc continues to appreciate, it increases the odds of larger intervention and potential price reversal. With CHF/EUR still rising it suggests current levels of intervention are slowing the trend somewhat, but the best tell-tale sign that they’ve ramped up levels of intervention is if we see a sudden momentum shift on seemingly little news. And, under this scenario, it could be argued that a counter-trend move could be far more interesting to watch if it catches enough traders by surprise and triggers stops.

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 or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account