EUR/CHF: given the strong demand for defensive assets

 
 
 
 
 
 
 
EURCHF W Chart

A bit of recent history. In 2014, the Swiss National Bank introduced a negative deposit rate for the first time since 1970. At the same time, since September 2012, the SNB has been striving to maintain the EUR/CHF exchange rate at 1.2000 in order to contain the "excessive" strengthening of the Swiss franc and ease pressure on the country's exporters. And until 2015, it more or less succeeded. However, as risks increased and as the euro became cheaper, the fall in EUR/CHF turned into a steady downward trend from May 2018, and after the Swiss National Bank unexpectedly raised the interest rate on deposits to -0.25% in the middle of this month (June 16), surprising investors and economists, who expected that the interest rate would remain at the same level -0.75%, the EUR/CHF pair fell sharply, yesterday reaching a new local low since February 2015 at around 0.9963 mark. Recall that in January 2015, the SNB decided to abandon the pegging of the franc to the euro, also moving away from the target level of 1.2000 in EUR/CHF quotes. On that day (January 15, 2015), EUR/CHF fell by more than 20%, and at the end of January 2015, EUR/CHF was traded close to 1.0500 mark.

EURCHF D Chart

Following the decision in June of this year by the Swiss National Bank to raise the discount rate by 50 basis points, its head Thomas Jordan noted that the Swiss franc is no longer highly overvalued due to the recent decline.

The accompanying SNB statement also said that "tighter monetary policy aims to prevent inflation from spreading more widely in Switzerland". At the same time, the bank reserves the right to "intervene in the markets in order to stop the excessive strengthening or weakening of the Swiss franc".

EURCHF H4 Chart

The franc strengthened sharply after this decision by the SNB, and the pair EUR/CHF fell by 2.47% in the moment, to a local intraday low of 1.0130.

At the moment, the EUR/CHF dynamics is dominated by bearish momentum, pushing it towards new multi-year lows. A signal to enter new short positions may also be a breakdown of the local low of 0.9963. After that, the decline in EUR/CHF may continue until the price “gropes” for new support levels: there are none yet.

EURCHF H1 Chart

Resistance levels: 1.0000, 1.0100, 1.0113, 1.0200, 1.0239, 1.0250, 1.0345, 1.0400, 1.0430

Trading recommendations

Sell ​​by market. Stop Loss 1.0020. Take Profit 0.9900, 0.9800, 0.9700, 0.9600

Buy Stop 1.0020. Stop Loss 0.9960. Take-Profit 1.0100, 1.0113, 1.0200, 1.0239, 1.0250, 1.0345, 1.0400, 1.0430