By FXEmpire.com
The EUR/CHF pair fell on Wednesday as the markets continues to punish the Europeans for debt issues. The Spanish had trouble selling bonds, and the markets reacted like you would expect…by selling the Euro on the whole. The European Central Bank Chairman Mario Draghi also made many dovish statements during the session’s press conference, so the Euro should continue to weaken as it is obviously now where near close to seeing a rate hike.
The pair has a long standing “floor” in it at the 1.20 level, and as long as he Swiss National Bank is willing to defend this area, we think that the only way to go is to buy the pair. The pair has been a great way to earn scalps from time to time, and as a result we have been buying the closer we get to 1.20, and simply collecting a dozen or so pips at a time. The worst case scenario would be a breakdown below the 1.20 level that triggers intervention by the Swiss, and this would more than likely send the pair to the 1.24 area. Because of this, we see the trade as one of the easiest to do, as the ultimate backstop is a central bank that has even went so far as to name their level of protection.
The situation is probably going to remain tight though, as there is no real reason to buy the Euro overall. The EU is going into recession, and the ECB head Mario Draghi was very dovish during the press conference today stating that the EU was in trouble essentially. This should continue to dampen the demand for the Euro, and one has to think that the Swiss National Bank is probably intervening already in a clandestine fashion. The bank has already stated that it was willing to “buy unlimited Euros” in order to defend the level. Because of this, we are willing to take advantage of this situation, and we think it is one we can be involved with for some time forward. Obviously, selling isn’t a thought.
EUR/CHF Forecast April 5, 2012, Technical Analysis
Originally posted here
