Is Long EURCHF a Sure Bet?

As the Swiss National Bank (SNB) has put the 1.20 floor in place, do you think a long is a sure bet? Also, SNB’s Jordan commented 2 weeks ago that they are fully committed to holding the 1.2 level (more info here).

Could this potentially turn into a black wednesday case? One of the greatest examples of central bank currency policy failures in 1992 when the Bank of England tried to stop pound’s devaluation. On September 16, 1992, Black Wednesday, George Soros’ fund sold short more than $10 billion pounds. Finally, the UK withdrew from the European Exchange Rate Mechanism, devaluing the pound, earning Soros an estimated $1.1 billion.

Is pressure growing? When looking at the EURCHF on the macroeconomic level shouldn't it be trading much lower?

what do you think will happen next?

If you want to think it's a sure bet then only you can decide. Either put your money where your thoughts are, or not.
I haven't witnessed much/anything yet that's a 100% sure bet.

A few years ago, I "thought" that SNB was going to intervene at a certain level re: USD Didn't work out

You CANNOT trust those suckers

Exactly! There is so much hype in that kind of talk.
After all what if the Euro people were talking about wanting to bury the EUR/CHF under 1.1800. LOL, I would enjoy something like that. It could be an all out war.

BTW, I don't know how the SNB could have all the say on where the EUR/CHF is headed. You have 2 separate currencies. If the euro is the overriding bear currency, then it will pull down on the EUR/CHF cross. Take a look at these examples:
1. EUR/USD*USD/CHF= EUR/CHF
2. EUR/GBP*GBP/CHF= EUR/CHF
3. EUR/AUD*AUD/CHF= EUR/CHF
4. EUR/NZD*NZD/CHF= EUR/CHF
5. EUR/JPY/CHF/JPY= EUR/CHF

Do the math, then you'll know. My question is still, "How can one bank have control over all the currencies. They are all interrelated, mathematically.

They don't have to. They only need to control the relative value of their chf against the eur, it wouldn't matter if both eur and chf devalued or increased in value against other ccy's, as the eurchf rate would remain unchanged. It isn't mathematically complicated at all, if eurchf goes down, then they simply sell some of their chf reserves and buy more eur reservers.

You're a smart kid, I liked your Metatrader connection trick.

To the original question, there's no such thing as a sure bet. There are only probabilities. This big ship, the market, turns rather slowly. If the swiss ever get used to the strong franc, it wouldn't matter if it's 1.20 or 1.19 or below.
But the lip service must go on. You can't tell your folks that they're gonna have to sell their products cheaper because they're simply not affordable to Eurozone buyers anymore. They would ask, why are you the SNB chairman then? F..k off and give your seat to someone who can do better.

fighting against devaluation it's not the same as fighting appreciation.
it's HUUUGGEEEE difference.

Not a "sure bet" of course but I think it's a high probability bet - if you're betting they will maintain the floor i.e. sell unlimited quantities of francs for euros at 1.2 (they can just "print" francs to buy as many euros as the market wishes to sell - unlike the BoE who were in the opposite situation and couldn't just print foreign reserves to buy pounds - big difference as mentioned above). Then the SNB sell some of their accumulated euros for USDs, GBPs, and others to diversify their reserves.

If you've been watching EURUSD and EURCHF lately however, you'll have noticed that EURCHF often goes down (though very little since it barely moves) as EURUSD goes up. In fact, during all of the risk on/risk off periods since the floor, I don't recall EURCHF moving in concert - e.g. moving up during periods of safe haven unwinding. It tends to move more on speculation of future SNB plans.

If you want to be that buying here will be profitable in the short/medium term however, that is a lower probability prospect imo. Well buying around 2010 will likely be profitable in the short term if you're looking for 10-15 pips. But unless the SNB does BoJ-style intervention, then you're likely to be holding a ~BE position for a long time. And I don't think it's particularly likely that the SNB will do a BoJ intervention. Though you never know. But they seem content to just keep buying at 1.2. Eventually those holding EURCHF shorts will (if the floor doesn't break) need to reallocate their capital to more productive endeavours, as being short EURCHF outright is a negative carry trade. And if/when the euro situation eventually brightens and interest rate hikes become real prospects again, and there is less risk in the world, the euro short unwinding will likely affect EURCHF - after all there is no *inherent* reason to be short it other than for safe haven purposes - and there will be a gradual trend upwards towards 1.3/4.

All that is long term. In the meantime the floor might break, but only if they decide to stop buying euros at 1.2. They have the power to buy as long as they wish, or as long as politically palatable. Those who are long may also exit their positions if it doesn't go anywhere after awhile. Probably most positions will be taken through options, so capital/margin isn't tied up long term in something that isn't going anywhere. If the SNB doesn't have specs helping them buy, and indeed if those specs sell their long positions, the SNB will have to buy more and more. But I don't think it's likely anyone will be accumulating a gigantic short position to try to break the SNB at these levels - it's too easy to lose. The market knows now that there are billions in bids at the number. And as they're consumed, billions more can be added. It's just not an attractive prospect to be shorting here. It's no BoE situation, as stated. Maybe they might try again next time there's panic about the eurozone.

As far as previous SNB interventions in 2009 or 2010, I'm not too clued up on them but I believe this is different in two major ways. First of all this is a "floor". The others weren't floors. Second of all, the SNB has committed to buying unlimited quantities of euros at this number. The SNB made no such commitment before. They would have bought a certain amount to try to discourage the market, scare out the specs, but then they were overwhelmed. Not so this time - they can just keep printing and keep using that money to buy euros. Inexhaustible.


My "prediction" then is that the floor will hold as long as the SNB want it to. They will only remove it due to political pressures - or if it's no longer needed. Meanwhile the EURCHF will stay very near the floor for another month or two, with the SNB doing nothing other than buying at 1.2, until the market becomes bored with it. It will then start to drift upward, say 150-250 pips up, as shorts unwind or are forced out as the price rises due to others unwinding, or as predatory accounts buy up the pair to force them out. It's unlikely imo that we'll see another "breach" of the floor like earlier this month, and it's unlikely the SNB will either raise the floor or do BoJ style spike interventions.
But who knows. Not me.

SNB Intervention Timeline, courtesy of Morgan Stanley

Looks pretty much like a cardiograph ... just I'm a little worried because it smoothened out recently. Is it dead yet?

there is currently far too much money to be made in the short side. if you are trading long eurchf, youre with the dumb money....