EUR/CHF: One Year of Free Market (07/2010-07/2011): March 2011

Up from revised 2.19 in February (initial 2.18.) Stronger than median forecast of 2.15.

Bit of a surprise.  EUR/CHF lower, presently at 1.2978.

EUR/JPY has made a significant move higher overnight and there are certain to be some long-term short positions in the market who are now questioning their resolve. EUR/CHF and EUR/GBP are also consolidating recent strength and all three of the major EUR crosses look more likely to go up than down, in the short-term at least. With this being the case, EUR/USD will also be more likely to edge higher although it’s unlikely to break out of its 1.4050/1.4150 holding range during Asian trade.

• EUR/USD: Barriers reported 1.4250, 1.4300; stops above 1.4280 (presumably heavy). Solid bids now around 1.4110/20
• EUR/CHF: Heavy stops above 1.2950
• USD/CHF: Stops above .9150, 70 and 90. Sell orders .9210/20.
• EUR/GBP: Modest sell orders .8820/25
• AUD/USD: Stops building above 1.0265
• USD/JPY: Kampo reportedly buying 80.50, stops below. Similar story topside with sell orders 81.80/82.00 and stops directly above there.
• NZD/USD: Decent-sized offers reported .7550/70

• EUR/USD: Important technical resistance at 1.4280; likely that there will be plentiful stops above there
• AUD/USD: Multi-decade highs at 1.0250; once again we can expect multiple stops above there
• USD/JPY: Well chronicled holding range 80.50/82.00
• EUR/CHF: Large stops reported above 1.2950

• Cable: Talk of barrier options at 1.6350
• EUR/CHF: Heavy stops reported above 1.2960
• EUR/USD: Light bids noted 1.4180/90; sell orders 1.4260/80; stops above 1.4285; more sell orders 1.4300/10

• EUR/USD: We suspect option protection ahead of 1.4200 but no confirmation
• Cable: Bids around 1.6170; interbank prop trader stops below 1.6160
• USD/JPY: Heavy offers 82.00; semi-official bids expected around 80.50
• EUR/CHF: Stops reported above 1.2850

The old record low in EUR/CHF was 1.2398, set back on new years eve. We fell to 1.2401 overnight before the combination of BOJ intervention and the Libyan cease-fire started to reverse the tide.

1.2850 is next resistance fore this cross.

Stops are already building below 81.20 from intraday longs. Long-term model funds are heavy USD/JPY sellers this morning.

EUR/USD has eased from 1.4146 highs but EUR/CHF buying after the surprising Libyan cease-fire is cushioning dips.

The USD/JPY meltdown also had the effect of driving USD/CHF to new record lows.

EUR/CHF broke below important technical support overnight at 1.2710 and the subsequent 300 pip collapse shows that the market was quite long.

1.2706 was the most recent low in EUR/CHF and that level has been taken out, turning the focuc on the all-time EUR/CHF lows at 1.2420 in the days ahead.

USD/CHF is at new record lows now, at 0.9105.

Zurich must have been quiet last night as the FX dealers are up early. The EUR crosses are the early targets for one of the big Swiss players who’ve been seen buying EUR/CHF and EUR/JPY in the last few minutes.

On anything really.

Dow Jones reporting BarCaps’ thoughts on EUR/CHF.  Maybe I should just try and get on their mailing list.

Bank notes EUR/CHF has bounced from daily cloud support and the channel base in the 1.2800/30 area.  Rather than aggressive upmove they expect to see slow recovery back towards 1.3140 and 1.3200.  See near-term trading likely between 1.2830-1.3040.  They favour dip buying.

The cross is presently up at 1.2960 from early 1.2940.

• EUR/GBP: Sell orders still reported .8650
• USD/JPY
• EUR/USD: Stops reported below 1.3770
• Cable
• AUD/USD: Corporate buying interest still noted just below 1.0000; heavy stops below .9930
• EUR/CHF: Decent sized buying interest 1.2770/1.2800

USD/CHF up at .9315 from around .9270 when I arrived, EUR/CHF up at 1.3020 from around 1.2965.

Move backs up nicely reports Sean has been getting that petro dollar accounts, who had been strong buyers of swissy, now showing preference for euro and to a lesser extent sterling.

EUR/USD is at session highs near 1.3990, similarly EUR/GBP at .8635, EUR/JPY at 115.05 and EUR/CHF at 1.2965.

There are no fundamentals to explain the recent strength in the EUR (and I don’t buy the reasoning that this is all due to a possible 25bps rate rise) so in the absence of fundamentals, flows are the most likely cause.

Hardly a surprising comment, but I guess it could be labelled “mildly hawkish.”

Swissy little firmer.  USD/CHF down at .9295 from early .9320, EUR/CHF down at 1.2975 from early 1.3005.

• Still watching swiss housing market carefully
• Housing market situation has not become more problematic, but some causes for concern remain

Many of the signs in the EUR/CHF market are telling me that the danger side is up. Major technical support has formed at 1.2700, UBS put out a buy recommendation at 1.2800 and the big Swiss accounts are buying in size.

USD/CHF still hasn’t quite cracked its resistance level around .9320 but I’d heard talk of large stops above .9335 and Jamie heard similar chatter in NY. If these stops go off in Asia, we can expect some big moves.

I’m not much of a proponent of buying breaks but USD/CHF today might be worth a shot; buying a break of .9335 with tightish trailing stops looks like a good risk/reward play.

There is trendline resistance from 1.5140 through 1.4280 coming in close to current levels. The 200-week MA is at 1.3957. A weekly close above both of these would be a very bullish indicator. The daily chart is bullish but could pull back significantly without altering the trend.

The EUR crosses are making a major statement with EUR/JPY breaking out of a holding pattern and EUR/CHF confirming major support at 1.2700. As I mentioned yesterday, the “Swiss mafia” were busy buying EUR/CHF early in the European session and they have a happy knack of getting all money matters correct.

Buying EUR/USD dips towards 1.3890 looks like a sensible play; technical resistance around 1.3980 and probable barriers at 1.4000 need to be respected.

It looks like the ECB statement yesterday may well be the event which ushers in some major short-covering in the EUR crosses. The long-term speculative market has been short pairs like EUR/CHF and EUR/AUD for some time but an aggressive tightening stance by the ECB might be enough to initiate some major short-covering. If this happens, we can expect significant moves.

The next question is whether this short-covering happens mainly through the EUR/USD or through the component pairs like USD/JPY and USD/CHF; or as a combination of both. My guess is that it would be the latter.

Good luck today and TGIF.

Last one before I go, one particularly big bank out of Switzerland has done the early ‘hoover’ in the cross, taking it from 1.2810 to 1.2835 in a matter of minutes.