Any intervention now will almost certainly invite more people shorting this pair, although it will obviously cause chaos in the short term.
The EUR/CHF rallied rather significantly during the trading session on Thursday, reaching all the way to the 50-Day EMA. It’s a bit difficult to understand exactly what happened, because the intervention in the Forex market during the session was from the Bank of Japan, not the Swiss National Bank. However, perhaps people are starting to worry about with the SNB is going to do, because by now they most certainly have lost their sense of humor about this downtrend.
The size of the candlestick is rather impressive, but at the end of the day, we are still very much in a downtrend, and I just don’t see how those changes anytime soon. With the ugliness out there when it comes to risk appetite, it does make a certain amount of sense that the Swiss franc strengthens, but perhaps we may have gotten a little bit ahead of ourselves. Clearly, the SNB is well known for jumping in the market and devaluing its own currency, but that only works for so long.
Look for Exhaustion
- It’s also worth noting that the situation in Europe is far beyond anything that the Swiss can fight, so perhaps maybe they understand that.
- It doesn’t mean that they won’t try something, but I find it a bit difficult for them at this point because it is such a small market.
- There are so many people trying to get money out of Europe right now that we could see a bit of a run on the franc.
Any intervention now will almost certainly invite more people shorting this pair, although it will obviously cause chaos in the short term. The parity level would have to be broken for me to look at this through a different prism at this point, which is something that I don’t see happening anytime soon. For what it is worth, we have pulled back somewhat from the 50-Day EMA already, so this shows you just how tentative any rally will be. It’s a nice candlestick, but at this point it still doesn’t change anything, especially considering that we are not willing to close at the highs of the day, which tells you again just how tentative everything is at this point. Look for exhaustion and take advantage of it.