By FXEmpire.com
The EUR/CHF market is one that has been followed by many traders lately as the Swiss National Bank has seen their 1.20 level challenged by the markets. The level was even pierced at one point, but the area held and there are reports of possible clandestine intervention by the SNB. Of course, it isn’t the massive intervention that many people feared, but the fact is that we are getting close to seeing the patience of the SNB tested.
The level is without a doubt an area that most people are aware of and the central bank will simply have to defend it or risk losing credibility. The higher Franc is massively damaging to the Swiss economy, and as a result this area will be defended. Unlike some other banks, there Swiss are known to suddenly intervene, and the verbal rhetoric has stepped up lately, stating that the SNB will continue to defend this level. In fact, there are several calls for the 1.35 level to be the one they try to enforce.
Many traders will talk about how interventions don’t work, but this isn’t necessarily true. Back in 1995, the USD/JPY pair was finally reversed by the Bank of Japan. The intervention took several attempts to work out for the Japanese, and that was a much larger market. The Swiss are playing in a shallow market, and can certainly move this pair if they need to. The meltdown of the Euro has abated somewhat and as a result – they have a decent chance of succeeding. However, it should also be stated that central banks work on their own time…
The candle for the Friday session was red, but not massively so. The recent attempt to breakdown the 1.20 level will certainly be on the radar of the SNB, and intervention could be coming in the next couple of days. With this in mind, we certainly cannot sell at this point. We do however have a small position in this pair on the buy side, as we expect to ride the wave that seems inevitable.
EUR/CHF Forecast April 9, 2012, Technical Analysis
Originally posted here
