Trading the EUR/CHF pair is much like watching paint dry this year. The fact is that the pair simply isn’t moving, and the whole world knows why. I wouldn’t normally talk about the pair in my articles, but the Thursday session saw a massive spike in this pair that will have certainly have a lot of people asking a lot of questions about the pair and what happened.
The main story making rounds in the trading rooms that I am in contact with suggest that the move was based upon a rumor of impending Swiss policy changes. It seems that someone out there started the story that the Swiss were about to implement a major tax on deposits in Swiss banks by foreigners. This would essentially make people pay large sums of money to park money in Switzerland, and this would certainly cause a drain of currency out of the country. It just so happens that the largest amount of deposits comes from Europe, so it makes sense this pair sees the largest move.
Never, and I mean NEVER trade the news
The move was a perfect example of why trading the news in a fractured market is risky at best and foolish in general. The rumor shot this pair up 70 pips, and I can promise you that several traders in the retail world bought at the top. They are now extremely angry and feel cheated. They would have heard the “news” much later than the professionals, and as a result got burnt.
The pair continues to be dead money. There is a small positive swap for being long, so I suppose there could be a trade to be had by going long down here to collect a small amount of swap at the end of the session. In some ways, it can be like a dividend stock in your retirement account. The pair won’t fall below 1.20 anytime soon, mainly because the Swiss National Bank informed everyone months ago that the 1.20 level was the “minimum acceptable exchange rate” of the Franc against the Euro.
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The breaking below of that level carries serious risks of intervention, and as such only those who want to lose money short this pair at the moment. The barrier has held firm so far, and there are reports that the SNB has been actively buying in order to defend it. Because of this, there is only one direction in this pair.