EUR/CHF A History of Interventions: October 2009

EUR/CHF is trading below 1.5100, presently at 1.5090,  very nearly at 1.5o80 where the SNB is last said to have intervened……….

The US GDP number was yet another sign of a global economic recovery and the big question for us FX traders is what trades to put on. The obvious carry-trade is to be long AUD against the JPY, USD or GBP, which are all now low-yielders, and this trade should reflect the increasing risk appetite in the marketplace. The problem with this of course is that the AUD/USD has already rallied 50% from its lows around .60. It’s not exactly cheap is it.

The other approach to take is that the USD may now start to bottom out. The US economy is after all the world’s largest and the market and all the big players are mightily short USD against all-comers. So if the US suddenly comes back into favour, and the global economy is growing again, which currency should one be short against the greenback.

The obvious answer for me is the CHF. The CHF is the typical safe-haven currency and the SNB has been quite successful in holding its value down against the EUR in particular. If we don’t need a safe-haven anymore, and if the USD is to appreciate, and if you don’t want to be exposed to a currency which appreciates when it’s a risk-on market- then the logical trade for me is to buy USD/CHF. And it’s cheap at the moment!

Any thoughts?

The guys over at Citibank’s technical desk haven’t been overly hot recently and their recommending a EUR/CHF trade is certainly a defensive move in that few pairs move as little as EUR/CHF does. Nevertheless, a clean break below 1.5050 would see a likely return to 1.44 according to their recent analysis. Maybe, but without me. I like my moves to be quick and painless and EUR/CHF is seldom quick.

EUR/CHF trades around 1.5115, sparking the usual talk that the SNB is not likely to be far below the market, on the bid around 1.5085. Given the weakness of the dollar, we wouldn’t be surprised to hear them “legging” into the cross, buying the the USD/CHF side of trade in the market, and then quietly buying the EUR/USD side from one of the European central banks, or through the BIS.

EUR/USD is choppy, swing around with US stock futures. US earnings reports have been quite strong today, but with the market already up strongly in anticipation of upbeat results. A correction could unfold at any time. It trades now at 1.4980.

Swiss September producer/import prices have come in at +0.2% m/m, -4.9% y/y, pretty much in line with median expectations of +0.1%, -4.9% respectively.

EUR/CHF seeing steady trade, presently at 1.5170.