Via Bloomberg
The strength of the Swiss franc against the Euro is helping Euro Stoxx futures rise higher. However, as we look to test the key 1.10 key level for EURCHF the question for equity traders is: just how much more can the CHF rise before the SNB act?
Deutsche Bank have recently announced they have entered a EURCHF short position at 1.1003. Their trade has a target of 1.0800 with a stop loss at 1.1180. Their trade is based on three points:
- Bund yields points to fair value
- Weekly sight deposit data shown no strong signs of SNB intervention
- Positioning should not be an obstacle to further downside near term
If concerns over global growth persist, US-China trade tensions are maintained and the ECB is dovish on Thursday then more EUR/CHF downside makes sense. However, SNB intervention on the EUR/CHF is a possibility and should be remembered by traders short EURCHF.
The next SNB meeting is two months away and the ECB may very well surprise with a dovish shift as they lean towards more potential easing on Thursday. So, although the SNB already enjoy the lowest central bank interest rate, that may get even lower in due course. Watch out for SNB action on CHF strength.
