EUR/CHF, a Year of Free Market (07/2010-07/2011): July 2010

EUR/CHF has been hit again, down at 1.3535 from early 1.3580.  Recently there has been talk of the Swiss National Bank selling the cross, something I for one certainly can’t substantiate.  Also yesterday there were rumours of a September rate hike in Switzerland.  All very murky.

The EUR/CHF cross selling has helped pressure EUR/USD, which is presently down at 1.3050.

Some big flows overnight led to interesting moves with rumours taking care of the rest.

There was some AUD bought for month-end but not nearly as much as some would suggest and there may still be some more to be bought today. The CHF made big gains on rumours that the SNB will hike rates. If you really want to go long CHF against the USD or the EUR at these low levels based on the fact/expectation that the SNB might raise rates by 25 bps in a few months, good luck to you. Sterling didn’t have the momentum to follow the other majors and lost ground on the crosses. EUR/USD stalled just shy of the supposedly big offers starting at 1.3115. Technical resistance is at 1.3140 (38.2% retracement)

Good luck today and TGIF.

Traders report vague talk of the SNB selling EUR/CHF today. This is the first tiem we’ve heard talk of sales in the cross as most of their activity has been via the “legs” up to now, selling EUR/USD and selling USD/CHF, opportunistically.

There were also rumors of an SNB rate hike in September making the rounds today, which helped strengthen the franc, so make of it what you will.

EUR/CHF trades now around the 1.3620 level. I’d continue to suggest avoiding EUR/CHF like the plague.

EUR/CHF down at 1.3650 from early 1.3740 as rumours swirl that the Swiss National Bank is preparing a September rate hike.

Nice to see the AUD/USD a little lower this morning but the overnight movements have been very mild. EUR/USD is still stuck at 1.30 but the single currency has given up some of its gains against the CHF and the JPY. With Wall Street having lost a little ground overnight, we can expect Asian exchanges to do the same which may translate into some mild risk aversion trading in the FX market.

Good luck today.

EUR/CHF and EUR/JPY both made significant moves higher overnight, and EUR/AUD has joined in today. EUR/GBP is holding above technical support at .8310 and EUR/CAD is also looking very constructive on the daily chart. My point is that if the EUR is well supported on the crosses there is no way that EUR/USD can fall and in fact it should soon start rising again. If present sentiment in the crosses is maintained, I’d expect EUR/USD to test the next important resistance band which is at 1.3115/45- and I’d expect this to happen in the next 24 hours.

As you probably know, I’ve been bullish EUR/AUD for some time now and this strategy has been very good to me. Based on the attached picture, I’ve gone long again. I can say with some degree of comfort that I am wrong if the market breaks below 1.4300. These are the trades I like, with clear stop-loss levels.

From a market perspective, EUR has broken higher against the JPY and the CHF and is close to support levels against the GBP. This gives me some added confidence.

From a fundamental perspective, I’m hoping that today’s Australian CPI goes the same way as Monday’s PPI and is softer than expected.

The events that immediately catch my eye this morning are that the AUD/USD is above .9000, the fact that support in EUR/GBP at .8310 held again, moderate strength in EUR/CHF and the slightly lower USD/JPY.

My immediate reaction to this is that the EUR/USD market wants to rally some more and that we may see an exhaustive rally into the mid 1.30′s before the market settles again.

It will be a quiet session on the economic-data front.

Good luck today.

Just one of the quotes from the latest AEP article in the UK Telegraph.

• SNB increased its foreign currency investments by some 132 bln francs in first half of 2010
• Sharp appreciation of franc, in particular against the euro, resulted in exchange rate losses of over 14 bln francs (and you think you have bad days!!!)

EUR/CHF and EUR/GBP both made decent gains again overnight and both have now turned short term bullish. EUR/JPY didn’t join in which will be a dampener for those bulls hoping to pick a bottom in USD/JPY; it’s failure to mount any sort of a decent bounce would seem to indicate a looming test of 85.00. The AUD has had a quiet night and is where we left it yesterday. Tokyo return today after a long weekend, let’s see what they make of it all.

Good luck today.

AUD/JPY is the main barometer of risk during the Asian timezone and it has opened 40 pips lower in early interbank trade. AUD/USD has broken below technical support at .8690 and the USD/JPY close on Friday below the important 87.00 level is also a bearish event. EUR/USD is trading at 1.2905, EUR/CHF at 1.3535 and cable at 1.5280.

Good luck today.

A source has recently told me there’s apparently an article in the Swiss newspaper Neu Zuricher Zeitung suggesting SNB’s Hildebrand may lose his job over SNB’s intervention related losses.

The source feels if its true (he’s not conversant with how relaible paper is), then this could possibly mean two thing

1) SNB paralysed by risk it has taken onto its balance sheet, precluding further intervention and

2) Likely requires SNB to sell EUR/USD to rebalance reserves away from euro and reduce its risk.

I guess they’ll be liking the higher EUR/USD levels currently on offer.  We sit presently at 1.2790.

EUR/JPY little changed on day, presently at 113.05. Talk of stops above 113.50 before decent-sized option-related sell orders around 113.75.

Presently at 1.3475 from North Americsn close Tuesday down around 1.3415, with real money said to have  been notable buyers in recent trade.

Dealers say that interest has been very limited this morning with most citing the World Cup final as the main reason. The JPY might now be adversely affected by the election result as the session progresses; President Sarkozy of France is under political pressure and will make a statement later today; the GBP will follow the EUR but technical traders are eagerly watching .8400; and the CHF and AUD will be pawns of risk-plays.

AEP is always looking for something bearish to say about the EUR but this story is one that we need to remain aware of. Challenges are on-going in the German constitutional court in Karlsuhe against Germany’s participation in any bail-outs of EMU member nations. My understanding is that these challenges do indeed have some merit and chances of success and as we know, were they to succeed, the proverbial would really hit the FX market fan!

The ill-advised attempts by the SNB to draw lines in the sand for the EUR/CHF have come at a heavy cost. The FT is reporting that total losses are close to CHF10 billion (although I’m presuming that the losses have not been realised and are of the paper variety thus far).

against expected +0.1

Y/Y came in at 0.5 against expectation of 1.0

USD/CHF trades 34 pips off the low at 1.0595

EUR/CHF trades 1.3318 after an earlier low of 1.3282

Swiss Fx reserves dropped CHF 6.3bn after the SNB dropped their intervention policy last month. Gold reserves rose by a similar amount, CHF 5.9bn

The Nikkei is now 1.6% lower and the S&P futures are 1% lower. The FX ‘risk’ trades like AUD/JPY and EUR/CHF are heavy and not really bouncing so far.

EUR/JPY has been relatively stable in recent weeks which in my view is a sign that it is set for further falls. Any pair that consolidates and starts to feel comfortable close to its lows is surely headed lower eventually. Nevertheless, we are presently sitting close to the middle of the 107/114 consolidation range so we’re not going to get many clues here just yet.

EUR/GBP is attempting to reject the break below .8200 and the strong bounce back would be confirmed by a break above .8400. Play the edges of this .82/.84 range and look for breaks either side to confirm the next EUR/USD move.

EUR/CHF is in a strong downtrend and whilst there will always be traders like myself trying to pick the bottom, the trend remains bearish (albeit prone to sharp short-covering rallies).

With US markets on holidays overnight, the FX market hasn’t moved at all and is more or less where we opened yesterday morning. I’m short AUD/USD from yesterday, and also have smaller short AUD positions against the EUR and the JPY. I’m waiting for a return of full-blown risk aversion and I feel being short AUD is the best play. I’ve also got a small long USD/CHF position but I’m less convinced here that my timing is right. Elsewhere I think EUR/USD will drift lower over the course of the week, possibly in a 1.2350/1.2600 range, cable similarly drifting lower in a 1.4900/1.5250ish range and USD/JPY to re-test support at 87.00. (But I have been wrong before!)

The Toronto stock market fell by almost 1% overnight and Asia will take it’s initial lead from there.

Good luck today.

Those looking to play the ‘risk’ card during Asia are probably best doing so through the AUD/USD and AUD/JPY. European traders will be more likely do so through EUR/CHF, cable and EUR/JPY.

AUD/USD saw some heavy selling from macro funds at the end of last week. If global growth worries persist and stockmarkets remain heavy, then I would expect the AUD/USD to fall towards 80 cents in the next few weeks. If USD/JPY breaks below 87, then this will also put some very heavy pressure on AUD/JPY. EUR/AUD continues its march higher and is closing in on 1.50 again, 1.58 remains my target here.

After a narrow range in Asia early players have pushed the above-mentioned around a little …probably taking out a few weak longs ( including mine in Eur/Chf ! I think if the Swissy can get above 1.0625 and hold we may see some short covering

Gerry has a few hours off this morning as he moves into his new palatial dwelling. I’ll keep things ticking for a while and then Dave will jump in the hot seat.

Zurich and Geneva are usually the first European financial centres to fire up their screens so lets hope they can liven things up a bit as its been a very quiet Asian session.

The market is always right and the market has been buying Swiss Francs like they’re going out of fashion. The prevailing logic is that this is the ultimate safe-haven trade. Surely though, if the proverbial hits the fan in the financial markets, the absolute last currency you would want to hold is the one whose value is largely determined by it’s banking system. I’m going to continue in contrarian mode and wait for the inevitable turn, let’s just hope I don’t go broke in the meantime!

USD/CHF and USD/JPY are somewhat lower on the day, cable has fallen back towards it’s hourly support around 1.4920 and of course the AUD/USD is falling sharply. The EUR/USD nevertheless remains fairly stable with EUR selling against the CHF and the JPY  being almost balanced out by EUR buying against the GBP and the AUD. Dealers say that Sovereign names like the BIS and Asian central banks have buying interest on the 1.2100 handle and that only a break below 1.2100 will reignite the bear trend.

EUR/CHF has fallen by 100 pips in the last two hours and AUD/JPY is also down close to 1% from its earlier session highs. The market has voted with its wallet and the CHF and JPY are the destinations of choice so fighting this trend seems futile at the moment.