EUR/CHF had a fairly active day for the session on Wednesday as the markets were originally positive for the Euro against the Franc, but turned around as gold skyrocketed with the Federal Reserve’s announcement that the interest rates would remain at ultra-low levels until the end of 2014. This killed the Dollar against many other assets, and gold shot up – as the Franc is often thought of as a “safe haven” asset, it stands to reason that gold was being bought for the session as both a “safety play” and a “hedge against inflation”.
The pair has other factors at play though. For example, the Swiss National Bank has been very influential in it as the central bank has a “minimum acceptable exchange rate of 1.20 in the EUR/CHF pair.” Because of this, selling this pair cannot be done with any real conviction. With the market being just 75 pips or so above it, there simply isn’t enough room to sell at this point. However, it seems the Euro cannot gain any real traction against the Franc. Odd if you think about it, as the Swiss are willing to sell, you would think the pair would rise over time.
The Swiss economy is also going to suffer in the long run as a result. The Swiss send 80% of their exports to the EU, and as a result they will find many of their goods too expensive for the recessionary environment in Europe. This will play havoc with the Swiss economy, and as a result, the SNB will continue to be diligent of the “floor” in this pair.
Buying is possible, but you would have to be patient it seems. The pair simply seems to be stuck between the 1.20 and 1.24 levels, and although the market doesn’t move too quickly – it does pay a slightly positive swap while you wait for positive momentum to pick up. While it isn’t our favorite trade, it is one that is certainly possible given the environment in the Forex markets lately. The pair could be bought on dips, but we don’t suggest tying up too much of your trading capital in this market.
EUR/CHF Forecast January 26, 2012, Technical Analysis
Originally posted here
