EUR/CHF continued to bump around the bottom of the recent consolidation range that it has been in for the last several months on Tuesday as traders simply are forgetting this market. The pair can be played, but only for short-term moves within the 1.24 and 1.21 levels. The Swiss National Bank is willing to buy this pair below at 1.20, and if we do manage to break below that level – intervention would be a foregone conclusion. The selling of this pair is impossible at these lower levels as a result, and the buying of it is the only option we have presently. The candle for the day does look very weak though, and as a result we are waiting for a more bullish candle from which to buy. However, we do know there is a bit of a backstop below – so it is a low risk trade for a couple of hundred pips if you are willing to wait.
With the EU debt problems looming, the area is going into massive austerity measures, and this will mean recession in 2012. The area happens to be the largest export market for the Swiss, and as a result the strengthening Franc is severely hurting the Swiss economy as their neighbors can’t buy their products. With that being said, it is also likely that the Swiss economy could find itself in recession down the road as well. It turns out that the European sickness is also the Swiss sickness, although through little fault of their own.
The pair is a screaming buy as we approach the 1.20 level as the Swiss National Bank will absolutely have to intervene to save face. After making the statement that it “can no longer tolerate a EUR/CHF rate below 1.20”, it absolutely has to buy at that level, or the markets will send this pair plunging much faster than imaginable. If the EUR/CHF traders find that they have been duped, they will come back with a vengeance. Switzerland cannot afford that to happen, so the floor will be kept in place. On the long side, if we could see a daily close above 1.25, this would be massively bullish, but in the mean time, we are buyers close to 1.21, and sellers at 1.24 as the range should continue.
EUR/CHF Forecast January 4th, 2012, Technical Analysis
Originally posted here
