The Franc’s Weakening Should Continue Against the Euro

(This is an excerpt from an article I originally published on Seeking Alpha on January 27, 2013. Click here to read the entire piece.)

Two weeks ago, I wrote “Time To Short The Franc… With The Euro” as a trading call that combined the likely continued strength in the euro (FXE) and the likely continued weakness in the Swiss franc (FXF). I was looking for a pullback in EUR/CHF to get started, but instead the currency pair continued to push upward sharply. For 6 out of 7 trading days, EUR/CHF relentlessly rose until hitting 1.25688, a 20-month high. This was “only” a move of 4.0% but relatively large for EUR/CHF. There are several indications that this is just the beginning.


The third outburst is a charm as it briefly sends EUR/CHF above the presumed near-term target level of 1.25
The third outburst is a charm as it briefly sends EUR/CHF above the presumed near-term target level of 1.25

Source: FreeStockCharts.com

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I took careful note when on Hard Currency on January 13th, Michael Sneyd, foreign currency analyst at BNP Paribas, estimated a long-term fair value around 1.40 to 1.45 for EUR/CHF. However, like so many analysts, he only forecast a rise to 1.25 by the end of the first quarter. The ability of the pair to hit and surpass that level so quickly is likely forcing many to re-evaluate their models for timing when EUR/CHF gets back to “fair value.”

{snip}

Certainly, SNB Chairman Thomas Jordan is not satisfied with the current rally. On Friday, January 25th, Jordan reiterated the SNB’s position that the franc remains over-valued. The SNB also stands ready to continue weakening the franc. {snip}

Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on January 27, 2013. Click here to read the entire piece.)

Full disclosure: no holdings

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