Recent History of the Swiss Franc: June 2009

• EUR/USD: big option play has tied the market in for the last 2 weeks and there are 2 more to go we believe. 1.3750/1.4250 range on the wide but it’s getting more like 1.39/1.41. Macro players take a holiday.
• Cable is consolidating in a 1.62/1.66 range and anyone who has played near the edges of this for the last 2 weeks will have done really well. A clean break-out in either direction will signal the next big move.
• USD/JPY has been in a broad 92/102 for the last 6 months. Same as above- play the edges until the next breakout gives a macro direction.
• AUD/USD: the RBA bought heavily at .60 and the market thought it was wrong. The RBA has been selling for the last month above .80 and the market thinks it’s wrong! My experience in the FX markets have taught me not to take on central banks. They are usually right.
• The SNB does not want the CHF to appreciate against the EUR much beyond 1.50.

In spite of many ‘important’ developments in the last 24 hours, we are opening in Asia at almost exactly the same levels where we opened yesterday. Get ready to job the market; if it’s good enough for a big player like China, it’s good enough for me.

Good luck today.

Sources confirm that the BIS has been seen in buying the EUR/CHF cross, which stands at 1.5335 at writing, having opened up in Europe down around 1.5290.

If the BIS was in EUR/CHF, then there’s a very good chance indeed that they were also in USD/CHF, although we have no confirmation of that.

USD/CHF and EUR/CHF are both appreciably firmer, USD/CHF presently at 1.0990, EUR/CHF at 1.5335.  Rumours are doing the rounds that the SNB has once again stepped into the market to buy both pairings. The central bank as usual refuses to comment.

If they are in, given the extent of the move, then it’s certainly not with the same aggressiveness as yesterday.

Renewed action by the SNB to weaken the CHF against the EUR and the USD has changed the FX picture and all eyes today will be on the BoJ to see if they start buying USD/JPY. Japanese exporters would love to have their products become more competitive and the Japanese authorities have not been shy in stating their preference to have USD/JPY above 100. The risk/reward trade of the day would seem to be, buy USD/JPY on dips with a stop below supposed big bids at 94.75.

Good luck today.

EUR/CHF is moving sharply higher as rumours circulate that the SNB has entered the market. We’re presently at 1.5085. EDIT: Rumour BIS in market on behalf of SNB (same difference) BIS declines to comment.

EUR/CHF is edging higher, presently at 1.5035.  Important technical support at 1.5005/10 remains intact so far.

Those of a bearish persuasion toward the cross might well be a little cautious given that SNB President Jean Pierre Roth is scheduled to speak at the French-Swiss chamber of commerce and industry in Geneva this morning (10:00 GMT)

Sources report decent-sized sell stops gathering down around 1.4985.

• Rumours of option related selling around 1.41 in EUR/USD but no-one I’ve spoken to has seen this interest and in fact they refer to trailing stops above 1.4110. More credible are the offers around 1.4175 which are said to be substantial.
• Decent sized AUD/USD offers at .8015/30.
• Large USD/JPY bids at 94.75 reported overnight.
• SNB and BIS are still expected to support EUR/CHF at 1.5000 but as I said yesterday, they generally are not seen during the Asian session so we may see large stops below 1.4985 triggered.
• GBP/CHF interest also mentioned with bids around 1.7450/75 and heavy stops below 1.7370.

• EUR/USD bids at 1.3800/25 thought to be option player buying back sales from 1.40+. Further heavy bids from 1.3750 down to 1.3650. BIS spied buying around overnight 1.3830 low.
• USD/JPY buying interest still strong at 95.25/50 with Sovereign names included.
• AUD/USD bids at .7850 as mentioned earlier. Stops on the day are said to be quite heavy below .7815 but more strong bids seen at .7735/65.
• BIS and SNB expected to buy EUR/CHF around 1.50. A word of warning here. Intervention in EUR/CHF is generally only seen during the European trading session. Standing orders are not normally left in the market. This leaves open the possibility of stops getting triggered during the Asian session below 1.50 (and the stops are said to be very big) before the Sovereign buying resumes in Europe.

A quick ring around some interbank dealers shows that not much has changed since last week:

• Strong buying interest still in USD/JPY at 95.25/50
• EUR/USD still tied in by some big option plays. Bids at 1.3870, 1.3800 and heavier again between 1.3650/1.3750. Offers at 1.4040, 1.4100 and heavier between 1.4250/1.4350.
• BIS and SNB likely on the bid towards 1.50 in EUR/CHF
• AUD/USD is very mixed in both directions until heavy bids around .7850 and heavy offers around .8250.

EUR/USD has chewed through first line of buy orders at 1.3900/10, which included Russia interest, presently down at 1.3890.

Sources earlier reported more buy orders lined up down at 1.3880/85, with sell stops just below there.

Technical support now at 1.3870/80.

Reuters did the ring-around to the central banks on talk of intervention in EUR/CHF and got the standard “no comment” from the SNB, BIS, and ECB.

The cross is up more that 1.25 centimes at 1.5135 at the moment. Actions, my friends, speak louder than words.

Not much to get excited about until we get above the 1.5250 level. We’ve been stuck between 1.50 and 1.5250 since early April.

EUR/CHF has ramped higher on reports that the Bank for International Settlements bought the cross on behalf of its neighbor, the Swiss National Bank. We trade at 1.5095 from 1.5008.

Switzerland now sees GDP contracting 2.7% in 2009 and 0.4% in 2010 versus previous forecasts for a 2.2% fall this year and a 0.1% rise next year.

An additional CHF 400 mln will be spent to to boost the economy in 2010, the government announces.

EUR/CHF is a tad firmer this morning, trading near 1.5100 as 1.5050 continues to support the cross on dips. Dealers assume the SNB will step in somewhere between 1.5000 and 1.5050 to sell the Franc.

The 1.5000/50 area is presumed by many to be the Swiss National Bank’s line in the sand for EUR/CHF. As part of their non-standard monetary measures, they’ve sought to weaken the Swiss franc via intervention, Their efforts have been scatter-shot, however.

Their initial foray into the market was a smashing success, squeezing out structural Swiss franc longs but since then they have kept a rather low profile. There have been a few reports of modest bidding through the BIS over the months but the efforts have been far from strenuous.

Traders are getting antsy and are probing the downside in EUR/CHF today to test the SNB’s resolve. Price held an earlier probe to the 1.5050 level and trade now at 1.5065. No sign yet of the cavalry, however.

Swiss Q-1 industry orders, an indicator of future industrial production, declined -17.6% y/y, much weaker than median forecast of -10.0%.

EUR/CHF is trading firmer on the day, presently at 1.5080 compared a European opening down around 1.5060.

The cross should find decent support in the 1.5000/50 area, despite heightened risk aversion which tends to favour swissy given it’s safe haven status.  Fear of renewed SNB intervention at these lower levels will be heightened.

Swiss import prices for May have come in weaker than expected at -0.3% m/m, -5.0% y/y compared to median forecasts of +0.1% and -4.7% respectively.

EUR/CHF and USD/CHF are steady post release at 1.5115 and 1.0880.

EUR/JPY has fallen almost 100 pips from it’s NY closing level as events in Iran and North Korea remind the market that we are really only one big event away from a significant hiccup in the worldwide economic recovery. Risk aversion has been the name of the game, with both the JPY and CHF crosses giving up ground. The Nikkei and Kospi are both marginally lower, echoing the sentiments of the FX market.

Nevertheless, remember my pet theory. The first move in Asia on a Monday morning, especially if it’s against the trend, is always wrong. Let’s wait and see.

News that North Korea are threatening to enrich more uranium for use in nuclear weapons is adding to the geo-political risk aversion play. In days gone by, the USD and CHF were always the big winners when any political tensions came to the fore. If we return to those days, as the small moves this morning suggest we might, then the USD could be the big winner as it makes up a lot of ground lost recently. (Another reason to leave an offer in the AUD/USD around the big Fibo level at .8375!).

USD/JPY is above 98.50 and EUR/USD is at 1.3970 as the USD looks a bit more attractive today, probably due to weekend events in Iran. The CHF is also a bit stronger on the crosses which confirms that there is some geo-political risk aversion plays taking place.

I have been in the money on this trade for a total of about 11 minutes and that is starting to grate. EUR/CHF is grinding lower and everyone I know is either long or square EUR/CHF, which is a bit of a worry. With cable and AUD/USD showing no signs of backing off, I’m reducing this position by half and will chop the rest below 1.0570. Break even on this trade is looking like an impossible pipe-dream.

Next please.

The Swissy markets are braced for a double whammy this morning with a speech from Swiss National Bank Board Member Philipp Hildebrand at 7.05 GMT and then inflation data due 10 minutes later. The SNB seem quite happy with a minor weakening in the CHF since their intervention in March, with Eur/Chf happy to trade in a tight 1.50/1.52 range. Further slippage into deflation is expected with CPI forecast to come in at +0.3 % m/m but falling 0.9% y/y. Eur/Chf  has ticked up to 1.5180 so far this morning.