Recent History of the Swiss franc: May 2009

Dealers expect to see bids appearing from either the Swiss National Bank or the Bank for International Settlements if EUR/CHF dips back towards 1.5050.

EUR/CHF has ticked up to 1.5200 at writiing. Rumours in market SNB sniffing about.

The EUR/CHF cross seems to be taking a breather after Fridays fun and games, presently at 1.5110, effectively unchanged on the day.

Now I’m a simple soul, as most of you will have gathered by now.  Seems to me as though we’re in a fairly solid trading range, with 1.50-1.52 the parameters.  With that in mind looks likely we’ll see good interest to buy surface on approaches of 1.5000 and sell interest on approaches of  1.5200. Decent stop orders would likely be placed either side of the paramemters i.e. just below 1.50 and just above 1.52.

The only thing which I think could upset this applecart is a pre-emptive strike by the SNB around current levels. While I’d never rule anything out, think such a move is highly unlikley.  The Swiss central bank seems to have confirmed Friday what most felt all along, that 1.5000 is the line they’ve drawn in the sand.

There are hours of boredom interspersed with moments of shear terror. Hers is a graphical representation of what terror looks like:

Faith in the Swiss National Bank’s willingness to support EUR/CHF reached a low ebb today as the cross dipped to 1.5509 before staging a sharp rebound to session highs at 1.5080 thanks to the BIS riding to the rescue of those nursing long EUR/CHF positions.

UPDATE: Sources tell us the BIS was very noisy in its buying, apparently trying to send a loud message. Makes one wonder why the SNB didn’t do the biz for itself while Europe was in the market. Seems a bit weasely to come in during the New York afternoon.

EUR/USD has come under pressure at midday, kinocked down as US equities turn sharply negative. The S&P sits at session lows down 1% at noon in NY. EUR/USD trades at 1.3537.

With risk aversion being ratcheted up and global stocks tumbling, it’s no surprise to see the EUR/CHF cross on the move. It’s presently down at 1.5053/58 having started out in Europe up around 1.5085, as swissy’s safe haven premium comes into play.

The possibility of further ECB quantitative ease is also weighing on the cross.

Now having said that, we’ve seen many times that the 1.5000/50 area has provided rock solid support, and the cross has found it hard to sustain a move below 1.5050 for very long.  Fear of renewed SNB intervention is obviously a big inhibiting factor.

If we dip below 1.5050 again, it’ll be interesting to see how long it takes for good demand to resurface. Probably not too long, if the recent past has any bearing.

Technical support of note lies down at 1.5010/15.   One has to think there could well be some sell-stops nestled just below 1.5010.

EUR/CHF is trading lower, presently down at 1.5045 compared to a European opening up around 1.5070.  Swissy is benefitting from the sell-off in stocks as risk sentiment takes a knock and the currency’s safe haven permium comes back into play.

We’re now in that area 1.5000/50 where we’ve consistently seen renewed buying interest resurface. You can bet your bottom dollar we’ll be hearing rumours of SNB sniffing around in the very near future.

Technical support of note 1.5010/15.

I trade much better when I have a view. I may be wrong but at least I have a plan and contingencies to that plan and that allows me to control my risk.

USD/JPY is in a 92/102 holding pattern and I will try and avoid trading this in any great size until we see the edges of this range. EUR/JPY is also in a 125/135 holding pattern but I see the danger for another final exhaustive spike towards 150. EUR/CHF is supremely well supported around 1.50 and EUR/GBP is it’s usual volatile self.

My conclusion from all this is that the EUR/USD must go higher. As I’ve said before, Sovereign names are soaking up on any dip towards 1.30 and it is generally hard work taking them on in the short/medium term. Last nights volatile price action is a positive in my opinion. Volatility will always increase significantly just when the market is ready to move. We are currently trading towards the top of the 1.3250/1.3450 short term range so I would not recommend going limit long here at 1.3400 but I nonetheless believe that we will see a 1.4 handle before we see a 1.2 handle again.

Seems there is a cut back in EURUSD long positions as the market readies itself on speculation of an ECB rate cut today. The median forecast is for a 25 basis point rate cut.

There are buyers at 1.3200, which has held nicely over the last few days, and good sellers throughout the 1.3380-1.3450 zone.

The EURCHF buy orders at 1.5050 are still there and proved to have held tight, seeing a rally of that base. EURGBP sellers from yesterday are still at 8880, too far to have an impact. Bids still stand at 8780 on the day.

Seems emphasis is to sell the rally in EURUSD today. Look to play 1.3270-1.3350 with a shorting bias for now.

SNB president Roth says that FX intervention is the strongest instrument to ease monetary conditions and avoid deflation. He says the SNB has to fight franc appreciation with all means. They will stick with the policy as long as deflation risks persist, he says.

EUR/CHF jumped to 1.5110 on the comments and now trade at 1.5095. The market would like to hear less talk and see more action. The SNB has been pretty quiet in the markets since their big splash last month.

There was good selling in EURGBP overnight, rumours a German Bank out of Frankfurt was the culprit. I am hearing this morning that Local banks have been passed EUR cross orders. EURGBP sellers are still in the wings at 8880-8900 with buyers to try hold the previous lows at 8780-8800. Interest in EURCHF as well I hear, with bids in the 1.5050-70 area.

The swiss franc is seeing some weakness, the EUR/CHF cross presently up at 1.5140 compared to a North American close Monday around 1.5100.

Improving risk appetite is weighing on swissy, as the currency’s safe haven premium gets slowly eroded.

Elsewhere the Swiss consumer sentiment index fell to -38 in the Q-2 versus -23 in the previous Q-1 survey, much worse than the median forecast of -28.  Very few green shoots being seen in the Swiss economy.

In an interview with the German daily Handelsblatt, SNB Vice-Chairman Hildebrand reiterated that the Swiss central bank is taking deflation risks very seriously and has to use currency interventions to fend off deflation as interest rates are at zero.

Comments will serve to underpin caution of SNB intervention around the 1.5000 level in EUR/CHF and continue to limit downside.