The EUR/CHF pair fell slightly during the session on Tuesday, but found enough support below to turn things around as we ended up forming a hammer for the day. This is a market that has been consolidating for some time, and quite frankly I suspect that the Swiss National Bank is behind a lot of this consolidation. They have been buying Euros recently according to financial documents released by the central bank, so of course it makes sense that they would continue to do so. On top of that, the market is fully aware of that, so it probably takes a very little to dissuade traders from selling at this point in time.
Swiss Exports
You have to keep in mind that the Swiss send 85% of their exports into the European Union, so it makes a lot of sense that they do not want the Swiss franc to be overly strong against the Euro. Ultimately, the 2 economies are intertwined, so it makes sense that it should chop around in general. If we can break above the 1.10 level, I believe at that point in time we certainly and are a “buy-and-hold” type of situation and we could reach as high as the 1.20 level given enough time as the market would completely retake all of the losses from the massive drop during the announcement that the Swiss were abandoning the previous currency peg at that level.
Most of the other Swiss franc related pairs have already done that, so having said that I feel that this particular currency pair is going to play catch-up given enough time. However, this isn’t necessarily the time of the year that I would anticipate this happening, but I would fully anticipate it happening in 2016. In the meantime, I’m fully willing to buy short-term pullbacks as it offers a nice steady stream of income.
