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EUR/CHF

  • #9,281
  • Aug 30, 2012 7:12am Aug 30, 2012 7:12am
Quoting phil3526
I am using rather substantial leverage, though I know what my worse case scenarios are and they will not ruin me.

I was under the impression that given the very very small probability of the price not only falling below but staying substantially below 1.2000, i would have thought hedge funds would be involved in this trade.

I am aware though that some hedge funds are rather "opaque" with investors. And that some (I have been made aware and read about) have been writing options positions that generate income (in the form of premiums paid...
I wouldn't imagine it is to high but in terms of capital it doesn't need to be. Lehman brothers in the end had figures than ranged for 16:1 to as high as 50:1 depending on which side you asked. Whilst leverage allows you to open more positions than you could otherwise it is that double edge sword that the more leverage you operate under the bigger the impact of smaller runs. I just hope that if you are using a reputuable broker that isn't going to widen spreads or slip you too much in the event that a black swan occurs in the pair your most exposed too.
  • #9,282
  • Aug 30, 2012 7:23am Aug 30, 2012 7:23am
Quoting Razor_trader
I wouldn't imagine it is to high but in terms of capital it doesn't need to be. Lehman brothers in the end had figures than ranged for 16:1 to as high as 50:1 depending on which side you asked. Whilst leverage allows you to open more positions than you could otherwise it is that double edge sword that the more leverage you operate under the bigger the impact of smaller runs. I just hope that if you are using a reputuable broker that isn't going to widen spreads or slip you too much in the event that a black swan occurs in the pair your most exposed...
I heard Lehman had a true leverage of even higher than 50:1, but I digress. My ECN broker has very very tight spreads, and my overall total leverage can withstand a fairly large fall in the EURCHF below the 1.2000 level. I know what my worse case scenarios are.

I think that as traders we need to look at what is the worst case scenario and can we handle that happening. And also, does out potential reward justify the risk involved. If so, then go for it....
  • #9,283
  • Aug 30, 2012 8:27am Aug 30, 2012 8:27am
Quoting brinks
Thanks all.

The problem i have is i dont see any sustained move up.
Waiting for a 30 pip spike is not what i'm looking for.

It will probably go and move up now i have said that
forget these 2 and move on to something that has more volatility
  • #9,284
  • Aug 30, 2012 8:38am Aug 30, 2012 8:38am
Quoting tonynulty
forget these 2 and move on to something that has more volatility
I have.

I cut them yesterday for a small loss.
  • #9,285
  • Aug 30, 2012 11:06am Aug 30, 2012 11:06am
Quoting Bluedolphin
Well, as you know, every time you catch a 30 pips ride at 1:100 leverage, you will cash in a 30% profit on your investment. That's equivalent to a 300pips ride at 1:10 leverage, which is all you can reasonably risk with most other pairs. For me, it's an absolute no brainer, but whatever you decide, I wish you only the best!

I don't believe we will see any more 30-pip-spikes once Jordan has said that intervention won't last forever but now is intervening in these extreme circumstances although it may cause losses in the future (it means EURCHF falling below 1,2000). It's a matter of time, and maybe shorter than expected by most investors. And all positive swaps will disappear next month
  • #9,286
  • Aug 30, 2012 11:39am Aug 30, 2012 11:39am
Quoting qatar
I don't believe we will see any more 30-pip-spikes once Jordan has said that intervention won't last forever but now is intervening in these extreme circumstances although it may cause losses in the future (it means EURCHF falling below 1,2000). It's a matter of time, and maybe shorter than expected by most investors. And all positive swaps will disappear next month
Maybe your right I think it was on Swiss tv that he said that.
But I just can't see them removing the floor yet still to much uncertainty.
  • #9,287
  • Aug 30, 2012 3:32pm Aug 30, 2012 3:32pm
Quoting qatar
I don't believe we will see any more 30-pip-spikes once Jordan has said that intervention won't last forever but now is intervening in these extreme circumstances although it may cause losses in the future (it means EURCHF falling below 1,2000). It's a matter of time, and maybe shorter than expected by most investors. And all positive swaps will disappear next month

Hi Qatar, in fact, Jordan did not actually say that there may be losses in the future. What he said (literally) is: "The question of losses is an important question, but it is not relevant in terms of monetary policy" (in German: "Die Frage der Verluste ist eine wichtige Frage, aber geldpolitisch nicht relevant"). He explained this statement by saying that the primary purpose of the SNB is to ensure monetary conditions that are right for the Swiss economy and to maintain price stability. So this is what counts. Giving up the peg would immediately create monetary chaos in Switzerland, the hailed ability of the export sector to rely on a stable exchange rate would be replaced by complete panic, and the danger of deflation (which now seems will be overcome in the near future) would return in force. So I simply cannot see any monetary argument that would justify giving up the peg. That's also why Jordan in the same interview made clear that (although the peg obviously won't last for eternity) NOW is not the time to ask the question of ending the peg. But you are absolutely right, of course, that Jordan's latest statements are not exactly helping to provoke 30 pip spikes for us longtraders. Well, let's see what (if anything) happens tomorrow around Bernie's speech! Good luck to all of you!
  • #9,288
  • Aug 30, 2012 6:02pm Aug 30, 2012 6:02pm
Good point , Bluedolphin , thanks for share.

Quoting Bluedolphin
Hi Qatar, in fact, Jordan did not actually say that there may be losses in the future. What he said (literally) is: "The question of losses is an important question, but it is not relevant in terms of monetary policy" (in German: "Die Frage der Verluste ist eine wichtige Frage, aber geldpolitisch nicht relevant"). He explained this statement by saying that the primary purpose of the SNB is to ensure monetary conditions that are right for the Swiss economy and to maintain price stability. So this is what counts. Giving up the peg would immediately...
  • #9,289
  • Aug 31, 2012 4:24am Aug 31, 2012 4:24am
Why is CHF appreciating?
We hear a lot that CHF is highly overvalued from officials in the SNB but still nobody cares and the demand for CHF is increasing? Looking back to 1990s the average rate for EurChf was 1.7 and there was always the sound massive overvalued Chf, but the SNB tried to justify that in that decade Euro was undervalued. What are the factors affecting CHF? Productivity, CPI, PPI, OIL? or..., The SNB might be asking themselves if the pace of productivity is that much higher than EZ and if not why the Nominal rate doesn't correct the movement. well the answer is "supply and demand", Switzerland is a small country and can't justify politically and economically unlimited urge of investors around the world for CHF, hedge funds and mass investors simply don't believe some words such as" the SNB can hold unlimited amount of reserves" because theoretically there is always a limit in financial market as well as practical task of the SNB for unloading reserves if possible and setting a ceiling as well as a floor. I look forward to hearing the speech of Jordan on Monday however the policy for now in SNB is not removing the peg for sure, they would like to hold it till EZ improves or economic data in Switzerland worsens and EurChf moves up and in case of more sever deflation they will repeg it higher.
  • #9,290
  • Aug 31, 2012 4:37am Aug 31, 2012 4:37am
Quoting holmes
Why is CHF appreciating?
We hear a lot that CHF is highly overvalued from officials in the SNB but still nobody cares and the demand for CHF is increasing? Looking back to 1990s the average rate for EurChf was 1.7 and there was always the sound massive overvalued Chf, but the SNB tried to justify that in that decade Euro was undervalued. What are the factors affecting CHF? Productivity, CPI, PPI, OIL? or..., The SNB might be asking themselves if the pace of productivity is that much higher than EZ and if not why the Nominal rate doesn't correct...
Hi Holmes

I dont think jordan is helping himself with the comments he made the other day.

He is inviting people to short the eur/chf and i dont understand why he does it as it isnt the first time.
  • #9,291
  • Aug 31, 2012 4:51am Aug 31, 2012 4:51am
Quoting brinks
Hi Holmes

I dont think jordan is helping himself with the comments he made the other day.

He is inviting people to short the eur/chf and i dont understand why he does it as it isnt the first time.
Hi brinks,
why do u think he did so? rate lower than 1.2 or stopping monetary policy will drive the pair to hell?
  • #9,292
  • Edited 5:48am Aug 31, 2012 5:29am | Edited 5:48am
Quoting holmes
Hi brinks,
why do u think he did so? rate lower than 1.2 or stopping monetary policy will drive the pair to hell?
I really dont know,all of the central bank chiefs are talking there own currencies down except for the SNB.

Its obvious the swiss economy can stand a rate of 1.20.

swissie getting stronger today.

As i have said many times before the euro is not getting hammered many people expected it to be below 1.20 eur/usd by now.
  • #9,293
  • Aug 31, 2012 8:01am Aug 31, 2012 8:01am
Swiss government backs SNB

Written by Adam Button
August 31, 2012 at 13:00 GMT

  1. Swiss gov’t says it supports SNB policy ‘fully’

  • #9,294
  • Aug 31, 2012 8:12am Aug 31, 2012 8:12am
Quoting brinks
Swiss government backs SNB

Written by Adam Button
August 31, 2012 at 13:00 GMT

  1. Swiss gov’t says it supports SNB policy ‘fully’

Is there going to be a shift in policy or they are talking and supporting history?
  • #9,295
  • Aug 31, 2012 8:13am Aug 31, 2012 8:13am
Quoting holmes
Is there going to be a shift in policy or they are talking and supporting history?
I dont know but it all seems a bit strange.

I wonder wheather they are gearing up for a shift in policy.
  • #9,296
  • Aug 31, 2012 8:21am Aug 31, 2012 8:21am
Quoting brinks
I dont know but it all seems a bit strange.

I wonder wheather they are gearing up for a shift in policy.
Well have a look at this http://www.numbeo.com/cost-of-living/gmaps_rankings.jsp with Euro upward movement price stability will worsen there.
  • #9,297
  • Aug 31, 2012 9:29am Aug 31, 2012 9:29am
Quoting holmes
Well have a look at this http://www.numbeo.com/cost-of-living/gmaps_rankings.jsp with Euro upward movement price stability will worsen there.

What kind of "shift in policy" do you have in mind?
  • #9,298
  • Aug 31, 2012 9:45am Aug 31, 2012 9:45am
Quoting Bluedolphin
What kind of "shift in policy" do you have in mind?
I dont know but i think Jordan should take some lessons from bernanke on how to talk a currency down.
  • #9,299
  • Aug 31, 2012 9:53am Aug 31, 2012 9:53am
Giving the economical data of Switzerland, I wonder why they implement a 0% interest and Beggar-thy-neighbour peg policy.


Unemployment 3%

Trade balance 2.92B (expected 2.10B !)

UBS bubble index: close to red, SNB is worried since many months, considers countercyclical measures

Inflation: y/y inflation went up last month from -1.05% to -0.71%. Given the Forex factory expectation of +0.1% m/m replacing -0.29% last year, the y/y inflation will continue to raise to -0.32%. This is still deflation territory y/y but the trend -1.05->-0.71->-0.32 is clear.


In such an economic situation isn't it strange that SNB needs very exceptional measures? What would they do in case economy is running bad? Extremely-exceptional measures?

Jordan abstains from Jackson Hole. Note that he also cancelled trips in 2011 before introducing the peg. So maybe SNB is working on policy changes?
  • #9,300
  • Aug 31, 2012 9:58am Aug 31, 2012 9:58am
Quoting brinks
I dont know but i think Jordan should take some lessons from bernanke on how to talk a currency down.

Well, as we should all know by now, that is not the way he functions. He is not playing the game of verbal intervention. He says something and then goes and does it until he says something else. He does not want to talk down the currency, because all he will get is speculative moves, first up and then again down, of course. He wants to sit out the EUR crisis with a range policy discouraging any speculative investments and then, once the macro setting is right again, let this bird fly free. No games, no tricks, no ruses, just the good old solid Swiss way. Boring but efficient.
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