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

The Armageddon trade is being taken off in dramatic size in thin-month-end markets, driving EUR/CHF above 1.2200. USD/CHF is nearing resistance at 0.8440.

Traders not talk of significant interest from real money accounts to buy both USD/CHF and USD/JPY at the fixing at 15:00 GMT. The danger now is that those orders are bring front-run…

Sharp bounce in the USD/CHF just now as market awaits the 2nd Greek vote.  Catalyst appears to be a break up through the 21 day MA at 1.2095 in EUR/CHF led by some aggressive buying from a US investment house, which has tripped some CTA and model stops. USD/CHF jumps to 0.8385 with EUR/CHF up around 1.2130 from  1.2077

Now what? Looks like the market was quite short of high risk pairs like AUD/CHF which has seen a big rebound in the last 24 hours. Now that some of the Greek votes are out of the way, we will all come to the realisation that nothing has really changed so we go looking for the next market-moving factor.

AUD/USD has closed back above the 20-day MA and should be targeting levels around 1.0830; EUR/CHF is back above 1.20 and I have absolutely no idea where it’s going next, though it will be volatile; cable has rebounded off the 1.59 lows and will undoubtedly be targeting stops above 1.6110. As for EUR/USD, I’m still of the opinion that we are in for a summer of range trading broadly between 1.37/1.47 so I’m trying not to get too distracted by all of the noise.

Good luck today.

No reaction from the swissy brigade , just marginally under expectations

Presently up at 1.1970 from around 1.1930 when I arrived.  Sources note real money has been buying this morning.

This cross buying (together with aforementioned EUR/GBP buying) will be helping underpin EUR/USD which has edged over 1.4400. We’re at 1.4405 having been as high as 1.4417 as the market continues to discount a Greek austerity yes vote.

The Swiss are usually the first traders at their desks in Europe and the first inclination seems to be to sell USD/CHF, which has slipped back to session lows near .8310, dragging the crosss back below 1.1930 again.

If it’s a rollercoaster ride you’re after for the next 24 /36 hours, then I suggest EUR/CHF might be the vehicle.

The CHF has been encountering a perfect storm over the last two years with all factors pointing in its favour; the fact that all the other major currencies have major issues to contend with, the Eastern European loan saga, general risk aversion after the GFC and most recently, the flow of money out of Greek banks (and into Swiss ones in many cases).

EUR/CHF should see some renewed volatility after the Greek austerity vote; a yes vote will ease the worries and may lead to some short-covering but a no vote could lead to a stampede of deposits out of Greek banks. The latter will have a big impact on EUR/CHF and it’s little wonder that the SNB is worried.

Quick overview of orders, most of which have been consistently reported for a few days now;

• USD/JPY: Semi-official bids around 80.00; corporate offers starting just above 81.00, stops above 81.15, more sell orders 81.65/75
• USD/CHF: Prop trader stops below 83.00
• EUR/CHF: Solid bids between 1.1750/1.1800 (thought to be semi-officia); trailing stops above 1.1970; more solid sell orders 1.2000; more trailing stops above 1.2020
• USD/CAD: Solid bids between .9650/.9700; corporate sell orders starting around .9940; option-related sell orders .9969/1.000; heavy stops above 1.0010

As Jamie mentioned earlier, this has been a one way street for a number of years and I think most people are of the view that at some stage this particular bubble will burst and the exit door will be very narrow indeed. The market hasn’t wanted to buy the USD, EUR, or GBP and has only bought the JPY as a back-up plan leaving smaller currencies like the CHF, AUD, and CAD as preferred destinations.

I’m not willing to call the bubble burst just yet but a credible Greek solution could be the event which sends EUR/CHF shorts scurrying for cover and I’m sure that the SNB would take great glee in rubbing salt into speculator wounds if the CHF suddenly starts falling. For my first 23 years in the FX market, EUR/CHF (DMK/CHF) was the market’s most stable pair; for the last two it’s been one of the most volatile. It’s fallen from 1.60 to 1.18 and could easily rebound towards 1.40 once the tide turns. I’m watching the daily charts for any signs of a bottom forming.

After making new lows near 1.4100 yesterday morning during Asian trade, EUR/USD has spent the last two and a half sessions rebounding. AUD/USD made fresh lows below 1.0400 and hasn’t rebounded nearly as far and the EUR has generally made significant headway on most of the crosses. If Asia is true to form, we will see the EUR crosses give up some of these overnight gains.

Good luck today.

I’m hearing that heavy bids are lined up below 1.1800 in EUR/CHF, getting heavier towards 1.1750, with talk that the SNB will take action to slow down the fall in EUR/CHF. We’ve heard this sort of talk before when EUR/CHF first fell below 1.2500 but the suggestion is that if it falls below 1.1500 then it’ll be at parity in no time.

As the SNB is about 25 billion long from 1.50, perhaps this would be a good time to try and improve their average 

Another day, another fresh record low in EUR/CHF; this time 1.1804 on Friday night.

Obviously no technical support anywhere but there are supposedly good sized bids around 1.1750.

Dow Jones report.

The main question for today’s session is whether the EUR short covering, which started below 1.4150 during the NY session, continues or whether the usual Asian risk aversion holds sway.

I’m hedging my bets; sell intraday rallies onto the 1.43 handle in EUR/USD; or whenever EUR/CHF nears 1.2000 or EUR/JPY nears 115.20

One of the big Swiss banks sees next support (ie notable bids) in the cross at 1.1750. Short-term resistance is seen at 1.2000.

The USD has continued to make some gains overnight but the fact that USD/CHF has fallen indicates to me that the market isn’t yet completely convinced that it should be buying the greenback. The EUR and the GBP have been battered especially against the CHF and it’s useless to try fighting these ultra strong trends.

Not much in the way of risk events on the economic calendar.

Good luck today and TGIF

Lots of holes in the price action in EUR/CHF as we tumble through 1.1900 without a fight. We’re now in the 1.18880s…

Use that as your panic barometer…

Not a good day to be making big bets…play with a smaller position today and rent, don’t marry positions. We’ve seen horrible sentiment turn on a dime many times before in recent weeks…

The EU wants broad buy-in from the Greek populace but we are still a long way from that…

EUR/CHF as record lows, at least partially as a result.

That cross fell into the 1.1940s.

Versus revised 1436 mln in April.

Swiss watch exports rose by 31.6% in May year on year.

EUR/CHF sits down at 1.2035.  That big Swiss pharmaceutical company did well yesterday, didn’t they.

Last seen selling at 1.2108. We’re at 1.2105.

You’d think he’d be in the alpine meadows tending his cows…….

The Swiss name on top earlier (see Gerry’s note 0652 GMT) has since moved his offers down to 1.2127, which seems to be doing the trick of pushing the cross lower anyway.

According to sources this guy is “directional” for what it’s worth…

EUR/CHF currently down around 1.2100 from early high’s of 1.2149/50

Apparently a big Swiss pharmaceutical company has been seen selling the EUR/CHF cross above 1.2135 this morning.  We’re presently at 1.2125.

EUR/USD has been chopping around in a 1.4370/1.4400 range  since the Greek vote was announced. Liquidity is still poor and even though there are some decent-sized sellers parked just above 1.4400, I still get the feeling that the speculative market is sitting short of EUR and we may see another exhaustive short-squeeze before the FOMC.

Watch also for reported stops in EUR/JPY above 116.00 and in EUR/CHF above 1.2160

(As a slight foreword warning, these reports are usually lagging the market by a few days; ie the data was probably compiled late last week and the analyst wrote the report yesterday)

A note from the interbank market suggests that hedge funds have significantly increased their short bets against the EUR, selling EUR/USD, EUR/CHF, EUR/JPY and EUR/GBP. The main market buyers, especially in EUR/USD and EUR/GBP, have been Sovereign players. If the hedge funds are mounting a serious play, then they will aggressively sell rallies in the EUR and of course the Sovereigns will be buying dips as usual; yet more reason to stay in the range trading camp.

Although judging by the moves this morning already, it looks like some of the less-committed professional traders are throwing in the towel already.

It seems we have a constant stream of rumours and comments relating to the EU/Greek situation and it’s difficult to look past all the noise and come up with a coherent trading strategy. The EUR fell very heavily on the Wellink comments regarding the size of the bail-out fund but then reversed and even made a net small gain on the FT article saying an EU/IMF deal had been reached (with lots of ifs attached- like more austerity measures for Greece and no details on which stage of Greek financing would be addressed).

Then we must also ask ourselves, how relevant is Greece to the entire EU picture and would a default inevitably lead to further defaults elsewhere and an EU banking crisis?

The big money Sovereign players are still buying EUR/USD dips so it looks like they believe that the ultimate ugly contest will eventually be won by the USD and that these phases where the market turns bearish on the EUR are just that, phases.

The great thing about a weekly chart in my opinion is that it takes noise in its stride. My reading of the current weekly EUR/USD chart is that we are in an uptrend that is currently retracing. Pullbacks towards 1.3650 look possible without endangering the uptrend and any rallies back towards 1.4700 are likely to meet heavy supply. In uncertain times, expect plenty of volatility and I wouldn’t be surprised if we see both sides of this 10 big figure range over the next 6 to 8 weeks.

Danthine’s comment that monetary policy is not directly targeted to a given level on the CHF.

He also said the SNB was unlikely to diversify its huge reserves into gold…

EUR/USD is seeing an oversold bounce after the comments, up to 1.4135. Look for sellers toward 1.4150.

Looks like the guys with the big bids at 1.1950 got them, as euro falls to a new record low of  1.1946.

Just been advised by a friend that stops have now been placed at 1.1940.

Safe for the moment as the cross jumps again to 1.1970/75

Talk the Swiss National Bank has intervened buying EUR/CHF below 1.1965.

My gut instinct is that this rumour is a load of old baloney!!!!  I typed something far stronger initially, but thought better of it 

Just soe’s you know the talk is out there. We’re at 1.1990 from session low 1.1954.  I think if the bank had been in we’d be appreciably higher than we are.

SNB board member Jean Pierre Danthine feels the Swiss economy is doing well enough at present to not need the bank to intervene in order to weaken the swiss franc. EUR/CHF at 1.2000 having been as low as 1.1954.

That was a short lived look below 1.1970.   Very big bids now placed at 1.1950 which now somehow feels a million miles away.

Talk of  a tier 1  european sovereign buying spree under 1.4100 in the EUR/USD, led a sharp bounce to  1.2014 in the EUR/CHF

but somehow I  think it’s not all over… just yet

Beleaguered euro gets a thump to  a new low of  1.1957  taking out large stops through 1.1970 in the process

Yes I know I’m stating the perfectly bleedin’ obvious but I’ve just read through some interbank reports on overnight activity and it seems that the move lower in the EUR/USD and the EUR crosses was mainly driven by shortish-term players exiting their positions.

Of interest also were the reports that China was a regular buyer of EUR/USD on the way down last night; no particular levels, just some steady accumulation.

Finally much of the bad news caught up with the EUR and it fell across the board, dragging risk trades with it as it tumbled. This is not the first time this has happened, and won’t be the last; the question is whether we are entering a prolonged phase of EUR negativity or whether it was just another clean-out.

Asia usually trades against the overnight trend but if we also see the EUR crashing during this session, then there may be something more to this move.

EUR/CHF at 1.2000 still a really important level to watch.

Good luck today.

Hearing there are sizable stops above the 0.8550 level. If triggered. might be a good spot to sell some USD/CHF while legging into EUR/CHF via the components. Sell the USD/CHF pop and then sell EUR/USD on rallies…

If risk aversion is to stay high, 1.2000 barriers in EUR/CHF will act as a magnet to the downside before long. The market is a lot less short EUR/CHF today after yesterday’s big rally….

It was very much a case of risk-on overnight but once again Asia is completely ignoring that lead and the usual risk trades like the AUD and EUR crosses are generally lower.

EUR/JPY is back below 116.00 and EUR/CHF is also 25 pips lower so far this session.

USD/JPY bids reported now at 80.25.

EUR/CHF remains well supported in quiet afternoon trade a shorts cover amid a sharp reversal in risk appetite.

Markets have been understandably short EUR/CHF for fear of raging Greek contagion. One sided markets have a tendency to reverse, no matter how compelling the fundamental story may be and we have experienced one of those reversals in the last day, day-and-a-half…

A break above 0.8470 could help fuel a further climb in the cross.

A sustained break of range-tops at 1.2315/20 will signal a near-term bottom is in place in EUR/CHF, leading to more short-covering.

Rising US rates and equities are a big boost to this view. CHF yields are right there with the US and Japan at the lowest in the world. A big move up in US rates puts the other two low-yields are a disadvantage.

It’s a risk-on world.

In under 36 hours the cross has rallied 2 centimes, from 1.2001 to 1.2205 earlier this morning.

Reasonably robust Chinese data overnight combined with not-as-dire as feared US retail sales have helped improve risk appetite broadly and has helped accelerate the trend toward covering risk-averse positions like short EUR/CHF.

Just crossing the wires, Portugal’s presumptive PM says his Social Democrats have struck a deal with the People’s party to form a government.

Swissy getting sold off against dollar and euro on fundamentals as yields rip higher and news ignored.

Nothing overly heavy, just the usual corporate plays I’m told with offers at 1.6415/25 stalling the advance.

EUR/CHF has also continued on with its bounce after giving up on another 1.2000 test.

The margin traders who take their leads from equity markets will now be starting to buy back their EUR/JPY shorts from earlier, as the Nikkei has inched 0.2% higher after being slightly lower in early trade.

EUR/CHF is lacking the necessary momentum to test the big 1.2000 barrier and is back near 1.2030.

Presently at 1.2015, down from 1.2075 at the NY close, with a low so far of 1.2008.

1.2000 was the overnight low but prices need to trade below the figure in order to breach the barrier.

Firstly it was barriers at 1.2050 and now there are more large barriers at 1.2000 which are influencing the market. As Jamie wrote below, these barriers held up despite the big Greek downgrade which shows that size can indeed trump fundamentals, in the short term at least. The market is massively long CHF but with few other currencies worth buying, it may stay that way for an extended period.

Safe havens? Don’t need no more, apparently…

A three-notch Greek downgrade was not enough to push EUR/CHF through the 1.2000 barrier. Seeing that, specs look like they are covering their EUR/CHF shorts, sending EUR/USD north in the process,

Resistance at 1.4420 is being overcome as we write.

USD/CHF is bouncing despite the news that S&P downgraded Greece three more notches. The dollar is edging firmer across the board as the risk trade is reduced across the board. EUR/CHF is steady at lower levels, supported ahead of the 1.2000 level where a barrier option is rumored being protected.

Small stops are sen in the 0.8375 area in USD/CHF while offers return toward 0.8400. Offers in EUR/CHF are eyed at 1.2050/55.

To put my “pop goes the weasel” headline up.  Much longer and I’ll be fast asleep.

Being told trailing buy stops now gathering up around 1.2075 in EUR/CHF.  We’re presently down at 1.2017.

Well I’d say given the recent price action there were indeed sell stops placed just below 1.2050.  Whether the 1.2050 barrier interest was or was not intact this morning now becomes a moot point.

Barrier interest now well-touted at 1.2000.  We’ve been as low as 1.2005, presently at 1.2025, so defence of said interest now well underway.

Somehow though I don’t think we’ll have to wait too long before someone gets to put up a “pop goes the weasel” headline. Hope it’s me. It’s the little things in life……..

Hearing a lot of buying of overnight 1.2000 euro puts being done this morning. We sit presently at 1.2100.

Down at 1.2095 from around 1.2125 when I sat down.

Talk of barrier option interest now at 1.2050 and 1.2000. Guess they’ll be sell stops lined up just below each level, although don’t have confirmation of that.

EUR/CHF is fast becoming the lead sentiment pair in the FX market and if it goes for a big run in one direction or another, then many other pairs will follow.

The recent lows in the cross have been at 1.2050, with Friday’s low at 1.2052, and there are still reports of significant option barriers at 1.2050 and 1.2000. I presume there will be some very heavy stops below the psychologically important 1.2000 level.

The EUR fell hard against all of the other majors on Friday and we now must wait to find out whether that was the beginning of a trend or simply positional squaring. EUR/CHF may provide the key as it will either post a double bottom or break below 1.20.

The AUD also lost ground in typical risk-averse trading but with Australian markets closed, it may have a quiet day.

Good luck today,

• MPs want say in agrements for new aid packages
• Resolution to be voted on tomorrow

Reuters are reporting that German MPs from the three coalition parties agreed late on Thursday on a resolution which will determine the German position ahead of the EU summit.

EUR/USD has rallied from 1.4515 to 1.4545 on the headlines but now the market will await further details.

Last night the ECB did exactly what the EUR bulls had anticipated and signalled a rate hike next month, and of course the EUR fell.

A bigger event which the market has been preparing itself for is the end of QE2 and of course the market has positioned itself accordingly; loading up on CHF and JPY to a lesser extent; offloading AUD long positions and even going short to some extent; and holding onto EUR rather than USD or GBP.

The risk now is that once the QE2 end nears, and the earth is still revolving, we may see a race to exit these trades above. That could mean a serious bump for the CHF bubble because if everyone starts to exit at once, the doorway will be rather narrow.

EUR/CHF finding some strong buying interest from model accounts now with a break through 1.2260 tripping some short covering back to 1.2281, which in turn has bounced USD/CHF to a day’s high of 0.8374

Reports of steady buying in both pairs this morning in a short squeeze, which has taken the cross to a session high of  1.2255. Talk now of stops postioned on a break of 1.2260

In recent trade.  Rally in cross extends as high as 1.2162.

Presently at 1.4390.

Real money has been buying EUR/CHF and EUR/GBP this morning, and this will be lending EUR/USD some support.

Talk of some light stops just above 1.4400.

Up at 1.2145 from around 1.2105 when I arrived.

No, it’s not the Swiss National Bank.  Apparently real money has been buying.

We shouldn’t be at all surprised as Asia usually counter-trades the overnight trend. EUR/JPY is at 116.40, up from opening levels near 115.85 and EUR/CHF is also back above 1.2100 after opening near 1.2065.

At the pace that this pair moves, we might be there tomorrow!

EUR/CHF has made fresh new historical lows again overnight. Two technical analysis pieces I’ve read this morning, using measured moves and trend channels, suggest that levels towards 1.1500 will be achieved in this phase. I’m certainly not going to argue.

The AUD reversed sharply overnight after the ridiculous rally post-GDP numbers yesterday. AUD/CHF and AUD/JPY were also hit extremely hard as risk aversion returned with a vengeance. Wall Street fell sharply and we may see similar falls here in Asia, with the Australian market certainly vulnerable.

EUR and GBP also suffered, but to a lesser extent. Heavy real money selling in the EUR/USD around 1.4450 finally took its toll and it reversed sharply and cable is 150 pips below yesterday’s highs. USD/CHF made new record lows, as did EUR/CHF, and that is one trend that seems to be gaining in strength.

Good luck today.

Down here in record territory, order boards are pretty bare, traders say. Not much until all the way down to 0.8250, from what we hear…Sell the rallies is the theme for this one and EUR/CHF as well.

USD/CHF sellers seen on bounces now to 0.8465.

Barriers eyed at 1.2100 in EUR/CHF.

Strong Swiss PMI earlier, combined with weak US data are the prescription for a firm franc. Amazing the economy holds up so well at record levels of strength.

Better than median forecast of 58.0.

Some decent Swiss data this morning.  EUR/CHF trading down at 1.2265 from around 1.2300 when I arrived.

There were separate attempts during NY trade and in early Asia to get at stops above .8555 but both failed as the offers around .8550 proved to be very sound indeed. Let’s see if the early Swiss market can get them done.

EUR/CHF is also attempting to launch a counter-offensive but is likely to struggle on any approach towards previous lows at 1.2400.