Recent History of the Swiss Franc: April 2009

It seems to me selling the EUR/CHF cross down here is akin to poking the elder billy goat gruff with a sharp stick.  You get it, Alpine meadows, goat herds….(Ok I know it’s a Norwegian kiddies’ story, but what the heck,  we all know what happened to the troll under the bridge. ) Yes that’s right,  he got gored and pushed into the river.

A fair few folk still feel SNB will turn up and intervene on a move to/through 1.5000.

The EUR/CHF cross sits at 1.5040, down slightly from where we opened up in Europe, swissy continuing to benefit from the heightened risk aversion.

An added note of caution might be a good idea this afternoon, with SNB’s Roth scheduled to speak at the Swiss Real Estate Institute in Zurich at 15:00 GMT today.

Next technical support of note is down at 1.5010/15.

EUR/CHF continues to trade heavy, presently sitting at 1.5060 compared to a North American close Friday up around 1.5090.

Swissy’s improvement comes against the backdrop of heightened risk aversion, as worries grow that the swine flu outbreak will slow global  economic recovery.  This is bringing swissy’s safe haven status increasingly into play.

Despite this most recent sell-off, it remains debateable how far this swissy strength can extend.  There remains a strong feeling that any approach of 1.5000 in the cross will ellicit a fairly swift reaction from the Swiss National Bank.

The SNB has vowed to combat any further swissy strength in order to help keep the spectre of deflation at bay. As a result, there remains a fairly decent interest to pick up the cross on dips below 1.5050.

EDIT:  It has just come to my attention that there are apparently sell-stops gathering down in the 1.5025/30 area.

EUR/CHF is seeing some decent action today, presently up at 1.5225 from an opening in Europe down around 1.5120/30.

The trigger for early swissy weakness was the release of very poor retail sales numbers and things were compounded by various comments from Swiss National Bank Chairman Roth.

Retail sales for February fell a hefty 3.8% y/y after a +1.2% rise in January.

SNB’s Roth says that while there are some signs of swiss economic stabilisation, the near-term outlook is bleak. He doesn’t see any turnaround before 2010 and then recovery will be a slow process. The SNB will continue to intervene as long as deflation is a risk.

Roth feels the situation at Switzerland’s largest bank UBS is still difficult, but the environment is improving.

Technical supports lie at 1.5180, 1.5150 and 1.5110, resistances up at 1.5245/50, 1.5270 and 1.5300/05.  It’s questionable whether this latest rally has the legs to reach 1.5300 without some additional fillip.

Interestingly some Sovereign names were seen playing the EUR crosses last night, selling EUR/GBP in particular. With strong demand for commodity currencies such as the AUD and CAD also coming from Sovereign players, it seems that some significant diversification is underway.

EUR/CHF is showing little or no real change on the day, presently at 1.5135.  The cross seems happy to follow stocks at the present time.

If stocks gain the cross moves up as swissy’s safe haven premium erodes. Stocks go lower and the cross trades lower as the safe haven premium comes into play. Boring, but that seems the way of it, for now.

Technical supports lie at 1.5110/20 and then 1.5060/65, while resistances are up at 15180/85 and 1.5250.

Reuters are reporting on the first of the big Swiss banks that has started closing US off-shore accounts to avoid confrontations with the US authorities.

With many financial centres closed for the long Easter weekend a quiet day is anticipated across all markets. The commodity currencies were the big winners overnight with the AUD and CAD making big gains on the crosses. The AUD/USD is likely to struggleto get above .7250/60 but a clean break will then target technical resistance at .7425. USD/JPY is consolidating recent gains and should remain in  abroad 99.50/101.50 range. EUR/USD looks and feels heavy and a break below 1.3115 will increase bearish momentum. Sterling is also continuing to make progress on the crosses. USD/CHF has now broken above s/t resistance at 1.1550.

Good luck today.

It has been a bit of a struggle to find anything worth trading but USD/CHF does offer some good risk/reward close to current levels. Keep stops above a recent daily high at 1.1550 and look for a move towards the bottom of the recent range, close to the 100-day MA at 1.1270. As I said earlier, market chatter has it that the market is short CHF against the EUR and the GBP so I am looking for a possible short-covering of these positions before the long weekend.

Historically there are not many major flows around holiday periods so any FX market movements are likely to be driven by position squaring. My understanding of how the trading market is weighted is as follows:

• Sterling; Short term EUR/GBP market is short, increasing the possibility of a short-covering rally. Long term EUR/GBP market is quiet long. Rallies should be capped and the next big move is expected to be down.
• JPY; USD/JPY speculative market is long, increasing the chances of a sell-off.
• EUR; Markets seem fairly square.
• AUD; most reports indicate that the market is long. A break below .7000 might see many exiting.
• CHF; Market is quite short CHF, especially against the EUR and many momentum funds have ben buying into GBP/CHF over the last few days.

EUR/USD broke below important short term support at 1.3290 and EUR/GBP fell below the psychologically important .9000 last night. More downside pressure is expected on the crosses in coming sessions. EUR/JPY will again lead the way in Asia after a volatile US session which saw the pair whipping around in a 200 pip range. I have no major bias just yet in EUR/JPY, but I think the failure at the 200-day MA is significant and I think we may well now see a consolidation phase, broadly between 129 and 137.

The EUR and the ECB are headed for some sticky times. The woes of Eastern Europe have not magically disappeared overnight and the ECB does not have much ammunition at its disposal. In the ugly contest, the EUR is running close to last and it is certainly at traditionally high levels against most of the other majors apart from the CHF and JPY. I do not think that this is the time to be overly bullish on EUR crosses.

EUR/CHF sitting at 1.5240 is not alot changed from where we closed out Thursday in North America.

Improved risk sentiment, which undermines swissy’s safe haven status; fear of renewed SNB intervention and ongoing pressure on global tax havens are among three factors supporting the cross.

The alarm bells will have gone off at the SNB today. Swiss CPI came in at -0.3% m/m and -0.4% y/y, much weaker than the median forecasts of flat and -0.1% respectively. The SNB has vowed to halt swissy strengthening to help ensure deflationary risks are quoshed. The data will only have served to steel their resolve.

Think we could see the ground above 1.5300 regained before to long.

The majors and the JPY crosses have all steadied after the sell off a couple of hours back and have started to try and make some headway once more. Lines in the sand seem to have been drawn at 1.3410 for the EUR/USD, 99.45/50 for the USD/JPY, 0.7125/30 for the AUD/USD and 70.90 for the AUD/JPY.

Just noticing that Tokyo has rebounded from the sell off after lunch and is currently trading up 0.5%.

EUR/CHF has been getting support on a number of fronts today. Most prominent were comments earlier today by SNB vice president Hildebrand that the SNB will use all available means to keep the CHF from strengthening.

Also undermining the CHF was a fresh focus on tax-havens at the G20 meeting today. The issue played a bigger role than expected and Obama is rumored to have brokered a deal. As well, the US government bought a tax evasion case against a client of UBS today who held several million dollars in a Swiss account and did not pay taxes on them.

The general decline in risk aversion is a minus for Swissy as well. Large global rallies in shares today and commodities are seeing money move out of safe-havens and back into potentially higher-yielding, riskier assets.

EUR/CHF trades near session highs, now at 1.5280, up more than a centime from the lows for the cross seen during Asian trade. 1.5300/05 is solid resistance on rebounds near-term.

EUR/CHF is presently up at 1.5250, having closed out in North America Wednesday down around 1.5170.  There appear to be a few factors driving the rally.

The better risk sentiment we’re seeing, with global stockmarkets on a tear, is helping erode swissy’s safe haven premium.

There is evident caution of  pushing the pairing too close to 1.5000, as many believe this could well be a line in the sand which would trigger renewed SNB intervention.

The EUR/CHF cross was already up at 1.5205/15 this morning when comments from SNB’s Hildebrand hit the wires. The official said that the central bank will use all means to prevent a strong currency, as a strong currency will bring with it the risk of deflation.

We’ve been as high 1.5266 post Hildebrand comments.  The move by the ECB to only trim rates 25 bps should help underpin the cross further.

It’ll be interesting, if/when we get there, to see whether the BIS turns up as an aggressive seller over 1.5300, as we saw recently.

SNB’s Philipp Hildebrand has warned the bank will use all means to prevent further appreciation of the CHF.  Appreciation of the currency brings with it the risk of deflation and “this must be prevented with all means” according to the SNB official.

EUR/CHF had stood around 1.5205 just ahead of the comments and has advanced to 1.5235 at writing.

The EUR/JPY is currently trading at 131.01, 20pts off its highs but if we can continue to hold in this 130.90/00 region we should be well placed for a spike higher tonight when London joins us. The EUR/CHF and EUR/GBP have been pretty quiet today but the USD/CAD looks like it wants to slip a little lower.

EUR/CHF is relatively steady. The cross sits at 1.1515 pretty much where we closed out Tuesday in North America. Inbetween we’ve been down to 1.5065 area, but the stay there was short indeed.

While 1.5180/00 was regarded by some as the line in the sand where the SNB would re-intervene, a much more popular touted level has been 1.5000.  Any approach of that level, if it indeed comes,  is going to be clenched butt-cheek time for the swissy bulls, for sure.

I don’t know why, but i’ve got a feeling the next decent move is going to be higher. I certainly feel we’re likely to see an improvement in general sentiment post G20,  with maybe a nice rally in equities. This would have the effect of eroding swissy’s safe haven premium, lending the cross decent support.

The other big event tomorrow is the ECB meet. I don’t think a rate cut in line with expectations (50 bps) is going to do much to the EUR/CHF cross. I’m not sure even a 75 bps cut would pressure it too much either given wariness of SNB.

The bigger unknown would be a reaction to ECB quantitative ease, but surely that’s at least partly discounted after all the speculation. And at the end of the day they might well leave it on the backburner, for now.