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SNB Line in Sand Breaks, EUR/CHF under 1.08

 

 

We have always emphasized that the SNB intervenes between 1.08 and 1.0850. Even if there was no change in sight deposits last week, the 1.08 “line in sand” broke.

It was surprising to me seeing that this year the SNB might have a second currency with big losses. The euro was 1.0874 on January 1, 2016.

We remember that the SNB had big losses:

  • Losses on the yen in 2014: about 20%
  • On the euro in 2015: about 15%
  • On the pound in 2016: about 20%

 

On the other side, the central bank has recovered the big losses on the dollar that it suffered in 2011- at least until Trump came.

See also our historic posts on other line in sands for the Swiss Franc, like the 1.50 line or the 1.40 line.

EUR/CHF Breaking 1.08

(see more posts on EUR/CHF, line in sand, )
EUR/CHF - Euro Swiss Franc

Source: Investing.com - Click to enlarge

 

Via ForexLive:

US election jitters kicked in yesterday as concerns grow on the fall-out and we’ve seen a sharp rise in the franc across the board

EURCHF yesterday fell through 1.0800 which has been widely perceived as the SNB unofficial CHF cap but they’ve been notable by their absence.

USDCHF has fallen further to 0.9712 this morning dragging EURCHF down to 1.0754.

So is 1.0700 the new 1.0800? or 1.0750 even?

Fwiw my take is that the SNB are fearing further carnage next week post-election and deciding not to jump in too soon. Plus CB intervention is always more effective when the markets gone too far the other way.

Recent intervention has seen sharp rallies but always running into sellers, most notably last week with 1.0000 easily capping a decent  SNB-led spike  and it’s been a steady descent since.

 

Don’t rule out the SNB jumping in today/tom just to remind traders they’re never far away and I’m happy to start a long trade with a small buy into this fall but many traders will not need reminding of the last time they became too dependent on the SNB to bail them out.

I didn’t make that mistake then and warned against it for many months before the SNB removed the cap. For that reason I’m not going to be jumping in with any sizeable trade just yet and I’ll be keen to sell any longs into rallies to re-assess.

Whether Clinton or Trump make it first past the post we could see some flight to quality next week that is by no means factored in yet.

USD/CHF when EUR/CHF line in sand was breaking

 

 

Via ForexLive

George Dorgan

George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers.
George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.

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