Market News & Analysis
EUR/CHF Hits a Nearly 3-Year Low as SNB Intervention Odds Fall
Matt Weller, CFA, CMT January 15, 2020 6:03 AM
“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.
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.