EURUSD-led puppet or still potentially a market leader ?
Invariably of late the moves in USDCHF have been led by EURUSD with EURCHF providing the anchor around 1.2160 but what does this tell us about the swiss franc ?
I have been a seller of EURCHF and USDCHF for a while as regular readers will know and I still prefer trading from the short side although I’ve given up on bothering with EURCHF for the moment, as indeed has the market in general.
So we can focus attention on USDCHF and the quandry it finds itself in as the SNB admits, apart from the 1.2000 EURCHF cap, to have run out of ideas/tools to deal with low inflation and a franc still over valued at current levels. Fortunately for them the recent geo-political tensions haven’t see such a flight in to the safe haven franc as had previously been the case but if it does all really kick off then I remain of the view that CHF will still prevail as a prime purchase in the eyes of investors and hence traders.
And we know that the SNB really doesn’t want to go into negative interest rate territory to curb franc strength so it’s essentially a case of them keeping their fingers crossed that market forces will work in their favour. Not a strong position for any central bank to be starting from right now, particularly when the need for intervention in their only tool is still 100 pips or so away and recent comments seemed to have ruled out any rise in the 1.2000 level to 1.25-30 as had been widely rumoured last year and to a lesser extent at various times this year
USDCHF daily 4 Aug
The dovish tones of Aunty Janet and then a disappointing set of NFPs have capped the recent USDCHF rally in attempts to break above 0.9110 and those strong offers remain with more up to 0.9150 then 0.9180. Inital support comes in around 0.9040 with bids between there and 0.9050 holding the latest retreat. Below that the next layer of decent buyers into 0.9000 then 0.9080.
I’m expecting any real fireworks in the foreseeable future but will continue to job this pair from the short side on rallies toward 0.9100 while not being too greedy when set. USD bulls can buy the dips of course but I still expect the franc to remain in demand across most pairs.
