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EUR/CHF

  • #9,181
  • Aug 23, 2012 3:48am Aug 23, 2012 3:48am
Anyone fancy giving a prediction on where price will be by the end of the year?

I think it will be exactly were it is now. 1.20100 area.
  • #9,182
  • Aug 23, 2012 3:56am Aug 23, 2012 3:56am
Quoting pipxster
Come on, lets go to square one for Jordan credibility is no1. priority. In long or even mid term that is the most valuable asset for a central banker, and the cheapest intervention. Jordan knows it very well. Can doubt this, but then its hard to argue. They wont do pull 1,1 then pull up 1,3 on week later.

They would completely destroy credibility thats just building up, see weekly intervention numbers that are now feasible for years.
Credibility is important, but May-July forex reserves proved that people will call your bluff if the economic situation does not justify SNB's action.

I'm not advertising going down to 1,1 and then pull back to 1,3. But they might feel more comfortable to peg to a basket.

Example EUR goes down 10% against USD,GBP,etc. because of negative development in Eurozone. The EUR/CHF might go down 5% to 1,14 and USD,GBP/CHF go up by 5%. The costs of keeping the peg would go down, and export would still be as strong as it is now (50% outside EZ).

So pegging against a basket would make the SNB less vulnerable to EZ problems which may come overnight. E.g. if Greek bank accounts are frozen, nobody will tell you before.

I agree that tourism may suffer a bit, but much less than in a free fall unpeg and only 50% of the X-rate change.
  • #9,183
  • Aug 23, 2012 4:06am Aug 23, 2012 4:06am
http://www.reuters.com/article/2012/...8JN2T120120823

The trade surplus rose to 2.9 billion - the second highest monthly figure ever recorded - from 2.2 billion in June.

Is CHF overvalued?
  • #9,184
  • Aug 23, 2012 4:18am Aug 23, 2012 4:18am
Quoting didi_doedel
The last 6 m/m inflation rates were
-0,48%
-0,28%
-0,02%
0,07%
0,56%
0,28%

So you calculate (0,9952*...*1,0028) and get 0,13% for the last 6 month. Extrapolated for a year you then have 0,26%.
Let have a look on 7 month inflation:
= -0.3, extrapolated for a year you then have - 0.5143 or 0.5143 % deflation

And now on 5 month inflation:
= -0.15, extrapolated for a year you then have -0.35 % or 0.35 % deflation

I dont' want to calculate the year inflation/deflation on 3 Month basis...

and don't extrapolate 1m inflation...
  • #9,185
  • Aug 23, 2012 4:22am Aug 23, 2012 4:22am
Quoting didi_doedel
Credibility is important, but May-July forex reserves proved that people will call your bluff if the economic situation does not justify SNB's action.

I'm not advertising going down to 1,1 and then pull back to 1,3. But they might feel more comfortable to peg to a basket.

Example EUR goes down 10% against USD,GBP,etc. because of negative development in Eurozone. The EUR/CHF might go down 5% to 1,14 and USD,GBP/CHF go up by 5%. The costs of keeping the peg would go down, and export would still be as strong as it is now (50% outside EZ).

So pegging...
why would the costs of the peg go down?
  • #9,186
  • Aug 23, 2012 4:23am Aug 23, 2012 4:23am
Quoting brinks
Anyone fancy giving a prediction on where price will be by the end of the year?

I think it will be exactly were it is now. 1.20100 area.
1.2011
  • #9,187
  • Aug 23, 2012 4:29am Aug 23, 2012 4:29am
Quoting alesss
http://www.reuters.com/article/2012/...8JN2T120120823

The trade surplus rose to 2.9 billion - the second highest monthly figure ever recorded - from 2.2 billion in June.

Is CHF overvalued?

This is why the SNB are stuck,it's obvious that the floor is working but if they remove the floor now the eur/chf rate would tank and probably hit all time lows undoing all the work that has been done.

So until the pressure is off the 1.20 level how are they going to remove the floor?
  • #9,188
  • Aug 23, 2012 4:31am Aug 23, 2012 4:31am
Ok here’s my analysis and prediction for EUR/CHF:

In my view, EUR/CHF cannot move down, because the combined damage to the SNB's credibility, to the value of it EUR-reserves and to the Swiss economy would be devastating or at least perceived as unacceptable. And Jordan, though he may not be the best communicator, he certainly is clear, straightforward and stubborn enough to pull through with what he thinks is right. He is not the tricky type. Listen to what he says and that's what he will do. Boring, but predictable. So the only way for this pair is up. But when?

As the Swiss economic prospects are unlikely to deter further investments (too positive), the factor that needs to change is the EUR-zone problems. And with his latest communication on August 2nd, Draghi has laid the ground for a paradigm change, namely the possibility of unlimited bond-purchases to "ensure proper functioning of ECB monetary policy" (very smart and creative way of looking at it, in any case it's new), and of the 2 Germans in the Council, Asmussen voted in favour and only Weidman abstained (but did NOT vote against). So something is definitely happening behind the curtains. My take is that everyone, including the Germans, want unlimited bond purchases to happen in order to save the Euro (everything else would be financial and economic Armaggedon for everyone), but that they have to find a way out which allows the Germans to save their face. So they scream in public and abstain in the Council (but make sure not to block it!), and tie the whole thing into a deal involving structure reforms by Spain, Italy etc.
Once the ECB bond purchases happen in actual practice, the path to economic recovery may still be long, but the fear of EUR-collapse will have become baseless. Then, all the investors having sought refuge in the CHF will see great long-term opportunities in buying cheap Euro-denominated shares, bonds etc. because now they know they cannot lose their money and the prices of whatever they buy will eventually move significantly to the upside, while CHF-denominated stuff will eventually have to rebalance towards the downside. THEN, you will see the EUR/CHF go up in a hurry towards 1.28-1.35.

All we need to trigger this development is an official bail-out request by Spain and / or Italy, which unfortunately does not look likely in the near term, because Spain has pretty much succeeded in re-financing itself for the rest of this year and interest rates for bonds of both countries have come down a bit lately. So I guess we will have to wait for the next mega-scare making rates unbearable for Spain and Italy and provoking them to request bail-out, which will finally bring in Super-Mario and his bond purchases, and FINALLY everyone will start realizing that the EUR is, indeed, irrevocable and that there is no point in speculating against it.

Conclusion: Ok, that's my analysis of things. It does not make the timing question much easier, but it means that EUR/CHF long remains the right strategy, and we just have to make sure we hang in there long enough, benefit from spikes and stick with a broker allowing us to do so without imposing negative swaps or exaggerated margin requirements. Good luck everyone!
  • #9,189
  • Aug 23, 2012 4:37am Aug 23, 2012 4:37am
Quoting Bluedolphin
Ok here’s my analysis and prediction for EUR/CHF:

[color=black][font=Verdana]In my view, EUR/CHF cannot move down, because the combined damage to the SNB's credibility, to the value of it EUR-reserves and to the Swiss economy would be devastating or at least perceived as unacceptable. And Jordan, though he may not be the best communicator, he certainly is clear, straightforward and stubborn enough to pull through with what he thinks is right. He is not the tricky...
Good post I like it.
  • #9,190
  • Aug 23, 2012 6:49am Aug 23, 2012 6:49am
Quoting Swissie
why would the costs of the peg go down?
Because
1) either EZ recovers and SNB interventions go down anyway (no need for safe haven)
2) or EZ gets deeper into trouble, then the peg for EUR/CHF falls which is then closer to market expectations, thereby attracting less speculation against SNB

at least pegging interventions would go down, and therefore risks go down.

I admit "costs" was not what I meant.
  • #9,191
  • Aug 23, 2012 8:11am Aug 23, 2012 8:11am
EUR/CHF is at 1.2009. If it weren’t for the SNB it would be 1.1709…Even with EUR/USD 5 cents higher and Europe’s problem’s “solved” SNB has to be the bid.I’d be scared stiff if I were them…

A comment from jamie coleman at forex live
  • #9,192
  • Aug 23, 2012 8:54am Aug 23, 2012 8:54am
Quoting brinks
EUR/CHF is at 1.2009. If it weren’t for the SNB it would be 1.1709…Even with EUR/USD 5 cents higher and Europe’s problem’s “solved” SNB has to be the bid.I’d be scared stiff if I were them…

A comment from jamie coleman at forex live
Thanks Brinks for your postive feedback earlier http://www.forexfactory.com/images/icons/icon7.gif

I guess investors shifting from USD to EUR because of expected USD flood by the Fed (which causes the current EUR rise / USD fall) does not mean investors also want to shift out of the CHF into EUR, because the fundamentals between EUR and CHF remain the same (as I argued in my previous post). This does not mean SNB should be scared, but it means they have to be patient and determined ("utmost", as we all know by now... http://www.forexfactory.com/images/icons/icon12.gif

Im my opinion the current EUR rise is a short-term move linked to FED QE3 expectations and may just as quickly move back down if FED decides to sit on their hands. The EUR/CHF depends on EUR dynamics only, not on USD/EUR ones.
  • #9,193
  • Aug 23, 2012 10:00am Aug 23, 2012 10:00am
Quoting Bluedolphin
Thanks Brinks for your postive feedback earlier http://www.forexfactory.com/images/icons/icon7.gif

I guess investors shifting from USD to EUR because of expected USD flood by the Fed (which causes the current EUR rise / USD fall) does not mean investors also want to shift out of the CHF into EUR, because the fundamentals between EUR and CHF remain the same (as I argued in my previous post). This does not mean SNB should be scared, but it means they have to be patient and determined ("utmost", as we all know by now... http://www.forexfactory.com/images/icons/icon12.gif...
Spain in bailout talks: Reuters

Written by Jamie Coleman
August 23, 2012 at 14:46 GMT

  1. No final decision has been made to request bailout
  2. No decision expected before Sept 12 at the soonest, EU finmins meet Sept 14/15
  3. Preferred option is EFSF buying Spanish bonds on primary market, ECB buying on secondary
  4. Discussions are held at technical level. focus on conditions and monitoring of aid
  5. Spanish banks unlikely to get emergency liquidity line before the end of September

Remember, Draghi said that Spain must request a bailout and agree to the conditions before the ECB will buy bonds. Some had expected a formal bailout request to come as early as tomorrow after a Spanish cabinet meeting.

Maybe we will get the bailout request you were talking about

  • #9,194
  • Aug 23, 2012 10:01am Aug 23, 2012 10:01am
Quoting Bluedolphin
Ok here’s my analysis and prediction for EUR/CHF:

Conclusion: Ok, that's my analysis of things. It does not make the timing question much easier, but it means that EUR/CHF long remains the right strategy, and we just have to make sure we hang in there long enough, benefit from spikes and stick with a broker allowing us to do so without imposing negative swaps or exaggerated margin requirements. Good luck everyone!
There are only 2 strategies in trading EURCHF now...
1. Long EURCHF
2. Don't trade EURCHF

Those shorting/testing the floor will find themselves in hot water closer to mid-Sept when Germany votes ESM & SNB monetary policy + negative swaps etc.

Heard Jordan is making a speech early next month. Anyone knows what date? Thanks.
  • #9,195
  • Aug 23, 2012 10:02am Aug 23, 2012 10:02am
Quoting alaneth
There are only 2 strategies in trading EURCHF now...
1. Long EURCHF
2. Don't trade EURCHF

Those shorting/testing the floor will find themselves in hot water closer to mid-Sept when Germany votes ESM & SNB monetary policy + negative swaps etc.

Heard Jordan is making a speech early next month. Anyone knows what date? Thanks.
Its either the 3rd or 4th of september
03.09.2012 09:00
Speech Thomas Jordan, "Challenges for Switzerland as a financial centre", NZZ Swiss Capital Market Forum, Zurich (with text)
  • #9,196
  • Aug 23, 2012 10:17am Aug 23, 2012 10:17am
Quoting Bluedolphin
Ok here’s my analysis and prediction for EUR/CHF:

[color=black][font=Verdana]In my view, EUR/CHF cannot move down, because the combined damage to the SNB's credibility, to the value of it EUR-reserves and to the Swiss economy would be devastating or at least perceived as unacceptable. And Jordan, though he may not be the best communicator, he certainly is clear, straightforward and stubborn enough to pull through with what he thinks is right. He is not the tricky type. Listen to what he says and that's...

IBEX in Madrid has recently increased almost a 30%, and EURCHF has not benefited from it. The same with the euro. EURCHF doesn't depend on risk aversion. Only it depends on SNB movements. If no expectation that "peg" will be raised (and it can't happen with Jordan, even more after strong GDP and trade balance data), franc can't devaluate. Still too much investors wants francs, but industry as well. Because franc may be "overvalued", but today we have seen that this is not an impediment to register a record trade surplus. It can't go higher than 1,20 because without SNB intervention now EURCHF would be below parity. Investors are buying francs at 0,8333 euros when it should cost more than 1 euro. With or without eurocrisis (which could be permanent: euro project will be uncompleted forever, unless nation-states dissapear) swiss franc would be higher. And with SNB offloading euros when it can, the cap is warranted. The floor? Not as warranted.
  • #9,197
  • Aug 23, 2012 10:30am Aug 23, 2012 10:30am
Quoting qatar
IBEX in Madrid has recently increased almost a 30%, and EURCHF has not benefited from it. The same with the euro. EURCHF doesn't depend on risk aversion. Only it depends on SNB movements. If no expectation that "peg" will be raised (and it can't happen with Jordan, even more after strong GDP and trade balance data), franc can't devaluate. Still too much investors wants francs, but industry as well. Because franc may be "overvalued", but today we have seen that this is not an impediment to register a record trade surplus. It can't go higher than...
So if the floor isn't warranted and they remove it and the eur/chf falls below parity do you think they would still register record trade surplus?

I do agree that we won't see much bounce before the monetary meeting no expectation of a rise in the floor.last time it only managed around 1.20300
  • #9,198
  • Aug 23, 2012 10:42am Aug 23, 2012 10:42am
Quoting brinks
So if the floor isn't warranted and they remove it and the eur/chf falls below parity do you think they would still register record trade surplus?
They don't need a record trade surplus. We can see that resistency of swiss economy to strong franc is very high. Higher trade surplus than with EURCHF at 1,65. Probably swiss economy could face a EURCHF below parity. ANd removing the peg will prevent any inflation problems in the future. Peg could remain some months because the risk is deflation (but it won't be during too much time) and global downturn still, but it is not guaranteed. SNB has full autonomy to give up the floor, some government member said. What is 100% guaranteed is that swiss franc would be clearly above parity without intervention. Now risk seems to be clearly higher than reward in being long
  • #9,199
  • Edited 11:03am Aug 23, 2012 10:45am | Edited 11:03am
Quoting qatar
They don't need a record trade surplus. We can see that resistency of swiss economy to strong franc is very high. Higher trade surplus than with EURCHF at 1,65. Probably swiss economy could face a EURCHF below parity. ANd removing the peg will prevent any inflation problems in the future. Peg could remain some months because the risk is deflation (but it won't be during too much time) and global downturn still, but it is not guaranteed. SNB has full autonomy to give up the floor, some government member said. What is 100% guaranteed is that swiss...
So your short at this level?

I think without intervention This pair would be Below parity.
The only reason the selling pressure has slowed is because the SNB have been very strong.if they turned round tommorrow and said the floor has been removed the pair would fall very quickly.
I think before the floor this thing was falling 300-500 pips a day
  • #9,200
  • Aug 23, 2012 11:10am Aug 23, 2012 11:10am
Quoting brinks
So your short at this level?

I think without intervention This pair would be Below parity.
The only reason the selling pressure has slowed is because the SNB have been very strong.if they turned round tommorrow and said the floor has been removed the pair would fall very quickly.

Shorting probably not yet. But first days of september or in a spike upwards, yes. The reason because selling pressure has slowed is because equities and EURUSD have done very welll in Europe (even with SNB selling euros and buying dollars, punds, etc?).
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