The EUR/CHF pair is one that I have not been involved with for quite some time. This is mainly because the Swiss National Bank put a “floor” in this market at the 1.20 level, and as a result the market should continue to respect that area. As you can see on the chart, we have essentially been hanging about the 1.22 level, but ultimately the weakness in the European Union has made this market fall down.
We are now getting dangerously close to the aforementioned 1.20 handle, and the fact that we tried to rally during the session on Tuesday but could not hang onto the gains tells me that we may very well test this barrier. That being the case, the market will be very well aware of that, and as a result I think that a lot of traders are down there waiting to buy this market. It will move in sympathy with the EUR in general, as it is being sold off drastically against most currencies.
Euro weakness could be interrupted by this move.
Overall euro weakness will continue to push this market lower, and the shooting star just solidifies this for me. That being the case, the market should continue to go back down but I think sooner or later the Swiss National Bank will have none of this, and send a message to the marketplace. Because of this, I am actually put in a buy order down near the 1.2020 level. I think this area will be tested, and we have to keep in mind that the central bank is at its own speed.
Because of that, it may not happen as soon as we hit the 1.20 handle, binds if you can keep a fairly wide stop, you can benefit from central bank intervention. The last time I did this, I ended up making about 250 pips while I slept. I fully anticipate doing that again sooner or later, especially considering how sick the euro is at the moment. With that, I already have my order in place.
