The euro is choppy against the Swiss franc on Wednesday, as we are a touch overstretched.
EUR/CHF
The euro remains positive against the Swiss franc overall, but it is a little bit sluggish during the trading session here early on Wednesday, as maybe we are just a little overstretched. Ultimately, I look at this as a pair that has the 0.94 level underneath offering support and the 0.95 level above offering resistance.
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ECB tightening expectations continue to rise while the Swiss National Bank is still sitting at 0%. Eurozone bond yields remain near multi-year highs going back to about 2008, and markets are pricing additional ECB tightening as energy-driven inflation persists. Meanwhile, the Swiss franc is suffering from its very low yield. UBS argues the carry disadvantage could push EUR/CHF towards the 0.96 level if the Swiss National Bank remains unchanged while other central banks tighten. I suspect that is the case, possibly even higher.
This is a meaningful change from the usual environment where geopolitical tension causes the Swiss franc to be attractive. This is unique in the sense that we have conflicts going on and people are running away from the franc, but you get paid to do so.
With this being the case, the sharp Swiss franc rallies tend to be looked at as buying opportunities. I certainly have felt as such. I've been long this pair for a while. I've got no interest in shorting it.
The 50-day EMA sits near the 0.9350 level and is rising. I think that's, at the very least, a trend line that you can follow. Ultimately, I do believe the 0.96 level gets tagged, possibly higher than that, but a short-term pullback makes a little bit of sense as well. We've pretty much been uninterrupted in our bullish move over the last couple of weeks. I'll look at that as a potential opportunity to add to a core position.
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