For four days, the Swiss franc held all-time highs against the euro (all-time lows of 1.40 for EUR/CHF). As the euro continued to decline against the U.S. dollar, I positioned (twice) in anticipation of a violent break of this support level. As the apparent support continued to hold, it increasingly appeared that the Swiss National Bank (SNB) was intervening yet again.
Sure enough, EUR/CHF suddenly surged on Wednesday as the euro surged against the U.S. dollar. The jump in this currency pair lasted much longer than previous surges, and it actually held up for the duration of the day. In fact, the franc was so consistently weak, it even lost significant ground against the U.S. dollar even as the euro gained against the U.S. dollar. This could mark a significant change in behavior that may force me to drop my bullish (short-term) trading bias on the Swiss franc. A full recovery of EUR/CHF’s losses on May 5 and a continued move upward may trigger the change.
Bloomberg interviews an analyst from BNP Paribas who attributes Wednesday’s move in both the euro and the franc to SNB intervention. The analyst also expects this intervention to ultimately fail like all other previous interventions. Certainly, the SNB is now up to its eyeballs in euros, generating huge losses for the SNB.
The charts below show the daily behavior of EUR/USD and EUR/CHF. The last chart is a 15-minute chart of EUR/CHF which demonstrates the persistence of the intra-day move.
Source: dailyfx.com charts
Be careful out there!
Full disclosure: short EUR/USD, short EUR/CHF, short USD/CHF