CHF opportunity, or avoid?

Hi guys

It was spectacular to see the today's PA of CHF. I understand it is something to do with pegging CHF with EUR.

Anyway, my question is, is this an opportunity to trade short? or wise if you avoid?

In other words, is it possible for the Swiss gov to manipulate the long-term trend over night? USDCHF EURCHF for example.

I understand direct interventions rarely succeed (see JP's last week), But this case, Swissy gov is saying "Peg" -- does it make any difference?

I will appreciate any idea from seasoned traders like you!

Thanks a million in advance!

I personally would never dream of trading against such a long, strong trend unless this is something you have predicted and already had a trade plan in place for. Taking reactionary, 'knee-jerk' trades to events like this is asking for trouble IMO.

wait and see. going short now is if you really really know what you are doing.

or you can go short if you have good money management skills. it is after all at the tip of resistance. this is indeed a good short setup.

just be ready to bail asap if it doesn't go your way.

I'm waiting for the GBP and USD high impact news on every day next week to pass then I will be able to make my analysis on the GBPCHF & USDCHF pairs.

Not much trading advice here, but I can tell you what a peg would do. It would link the CHF to the EUR in a very narrow (effectively non-tradeable) price band. There would be essentially be a fixed EURCHF rate and the pair would essentially be taken out of the market. This is different from FX intervention, which is not sustainable or workable for long (pissing in the wind, excuse the expression). A peg is much more definitive and can stick for a long time, as in years (though it can blow up, as in the system of pegged rates within the EU in the EMS which blew apart in the early 1990s--what is going to happen in a different way to Greece, etc., if it and others are blown out of the EUR single currency sooner or later).

I don't know what effects a EURCHF peg would have on the USDCHF. Maybe make it rise, as CHF is being depreciated on the EURCHF cross by that peg.

Effectively, what the Swiss gain by this is a depreciation of the CHF, by hooking up to the weaker EUR and locking in to it. They've not been able to depreciate the CHF through intervention, given the rush to safety as EUR suffers from debt problems.

The issue for you is: does the peg go through? You're essentially trading something like a corporate merger of stocks (stock arbitrage trade): does an announced stock takeover go through or not?? You can see what's happening today is "buying the rumour". You know the other half of that: "buy the rumour, and sell the news." So if/when the peg goes through, maybe CHF is a buy at that point (as everything will have been fully discounted by then: the expectation of the peg will be fully priced into the current exchange rate then, which will probably have overshot or overdepreciated).

But if there's a pegged/fixed EURCHF rate then, it's prob. not tradeable any more. It would be a buy CHF trade perhaps against the USD and GBP, etc.

But I think this is an insider's trade, per Lipschutz in one of Schwager's Market Wizards books, where the big bank traders trade the info. flow, rumours, inside info., etc. These are George Soros type trades, not stuff for guys with MT4 looking at charts. I don't think they will respond to technicals and chart levels, but to info. flow, and that's an insider's game, a global macro trader with deep connections with the big players (I mean on the phone daily).

Guys thank you very much for your thoughts!! It is very interesting to hear you!

Here is my speculation in near future.

The JP gov intervenes when USDJPY reaches 75 which I think will happen sooner or later. When it happens, what does USDCHF do? Can it stay where it is, or is it forced to go down?

This is a currency war going on anyway. I believe neither JP nor Swissy can win the market, but Swissy is more vulnerable because they can't spend "live ammunition (cash)" to intervene the market (they use only "rumors").

Considering EUR's getting quite shaky in its currency values, I think next 4-6 weeks are very interesting watching CHF pairs

BTW I'm short in USDCHF and EURCHF.

Okay, I think "peg" rumor is just a catalyst for the contrarian to take a position. From my point of view, the uptrend of CHF was rapidly excalated after 2008, the last global recession. People & institution diversified their reserve heavily to CHF as save haven.

What interest me is, the assets that back Swiss are mostly EUR denominated. They heavily buying EUR started from that 2008, and now their reserve are majority on foreign currency which bigger part of it is EUR. So it's kinda "devil circle". People rush away from risky asset (when europe had a crysis) to CHF, but Swiss itself backed by EUR.

The data shows inflation rate of Swiss from 2008 is creeping lower, and foreign direct investment inflow drastically low compared to early 2008. So, is that mean CHF uptrend actually not based on real condition? Is it just because of risk aversion & hot money?

If that so, may be that's why SNB feeling uncomfortable of the accelerated rise on CHF, because even if they hardly cut its interest rate near zero, CHF still surge up. Then, it's rational for them to try to think another measurement.

In technical flow, we can see that last 5 months of CHF currency rate sharply rise, could be an indication of low liquidity, when most people already had long position from years before, and then the currency rate spike up sharply, who's left to buy? Even if there are someone, or some institution, would they reluctantly bidding at this "expensive" level?

Here I don't want to shout out "short" CHF and then drastically it change direction, but I think this consistent trend from years before starting to show its weakness.

[/quote] when most people already had long position from years before, and then the currency rate spike up sharply, who's left to buy? Even if there are someone, or some institution, would they reluctantly bidding at this "expensive" level?

Here I don't want to shout out "short" CHF and then drastically it change direction, but I think this consistent trend from years before starting to show its weakness.[/quote]

It makes sense to me.

It is very fascinating to see PA of CHF because it has been holding such a long down trend. We'll see if it finally ends... The problem is this world-wide financial uncertainty, USD and EUR in particular.

I'm neither economist nor pro trader, so, just might as well enjoy watching it (with bidding a little change on)!

Thanks!

The threat/rumor of a peg last week to the EUR was just a cheap way for SNB to weaken the CHF without intervention. The strong Swissy has hurt the Swiss economy, but it will continue with our world financial and economic crisis because CHF and JPY have always been safe havens.

If it continues, I think a PEG may be in the offing before years end!

Yes. The people who will win at this are the ones who are friends with the managing directors at Credit Suisse & UBS, who in turn have friends and relatives who work for the Swiss National Bank.

George Soros won in the early 1990's because he could see that the pound peg was unsustainable macroeconomically. Either you have to bet on unassailable macroeconomics or insider connections.

These days, the Swiss are wealthy. Do they have the willingness to print unlimited quantities of CHF? If so, don't fight them.

Personally I think this could be a macroeconomic turn. If equities start to rebound (as they often do in Sept/Oct after bad summers) then EUR/CHF is going UP. I won't bet now.

http://www.forexfactory.com/images/buttons/quote.gif

GO LONG GO LONG.. holy shit turn on your TV and listen to the news and trade whatever the F***K they tell you.. no.. no don't make up your mind listen and breed off the rest of the blind

This. Someone mentions a peg so you want to short CHF?? What are your entry criteria? What is your trigger? In what kind of economic climate would you contemplate this trade, in what kind of climate would you ignore this news? What is your profit expectation on this trade? How would you handle similar news regarding a different currency? Like I said before if you are not in the business of trading these events and dont have plans in place in advance to deal with particular news releases, dont try to trade them.

I'm playing on both sides since the spike last week so either way.

Speaking of JPY, USDJPY is also very interesting to see this week, like CHF. If the JP gov intervenes, where does the money go? going to CHF? or USD, EUR, or gold? or maybe going to China???

See the news release.

Again, this trade is going to evolve according how, when, and if the Swiss peg their rate vs. the EUR. This is an insider's info. game, news release game etc. (informed global macro traders will trade/create scenarios here, putting down all the variables on a yellow pad of paper, one column the plusses, the other the minuses and the probabilities of each factor individually, then weight each and add up the expected values--and change all of these daily--according to the news flow and inside info. and their bank contacts, phone conversations, etc.).

RSI 14, MACD etc., divergence, etc., whatever indi, custom or not, you create, LOL, don't stand a chance against the above for now. They've totally irrelevant (it's like trying to speak Chinese to an Eskimo, or vice versa: no can do). And price probably won't respect technical levels until and after the above plays out.

The Swiss deliberately announced stuff on the weekend, when no one could react, to badly hurt specs. There must be a couple of smok'in terminals in London right now!

Found an interesting article from Action Forex (8/15).

"some traders considered the speculation of a EUR/CHF peg has been over exaggerated and the franc may rebound this week when traders start realizing such a peg may not materialize. In addition, with U.S. and eurozone still having their own economic problem, Swiss franc remains the major safe-haven target for investors, so if nothing happen on the rumor day of implementation on 17 Aug, the Swiss franc may rally later this week"

For a full text, go to
http://www.actionforex.com/action-in...0110815146562/

My read
I don't know if Swiss passes a peg bill. But if it happens, Swiss will go down with other European countries due to their impossible debt -- what an irony it will be (Swissy purchase power will decrease tremendously). SNB stinks when it comes to policy making if you ask me.

EURCHF and USDCHF weekly chart shows indecision or a possible trend reversal, but that's the weekly chart so theoretically you could still short it for another month or two

Found another interesting article at Street.com

"A euro peg is not the easiest step to consider for Switzerland, either politically or legally."

The full text:
http://www.thestreet.com/story/11220...cm_ven=GOOGLEN

8/17 needs to be seen

What do you mean?? The JPY intervention worked perfectly for them.
There was a reason they did it on August 4th and there was a reason they pushed it to 80.00.
They even announced it on japanese websites prior to the intervention.

People always think intervention is about reversing a trend - it aint!!