EUR/CHF

eu 1.7% drop adding pressure on ec, specially considering uc 1.6% rally today. I can't imagine all the new retail ec long today.... if snb decides to remove the peg (very unlikely at the moment) this would drop 5bf in a few seconds

Why remove peg?They said they'll defend so why now change?The pressure from an over valued currency still exist. I'm thinking they'll reduce rates as per EUR.When is their next planned announcement on rates?

sept 18

Reduce, reduce... They are already at ZERO. 3 months CHF LIBOR is a 0.02%, overnight LIBOR is already negative.
They are reluctant from setting negative interest rates. People would take back their money from banks, that would hit the banking sector.

What can they do ? I don't know.

EDIT: We are living a pretty interesting period Some people believe all this will blow up, they may be right soon (not speaking of only E/C)

Whatever they do to devalue the CHF could cause people to take money from their banks. That would devalue their currency more whicj is what they want. Right now it is over valued as it's seen as a safe haven. SNB want to stop that and make people take their money elsewhere.

Yes and no. Maybe they want foreigners to take their money out of Switrezland. But with negative interest rates, people/companies from Switzerland itself would take their money out too. They don't care of the exchange rate. Miss and Mr "everybody" doesn't look at exchange rates at all. But tell them they have to pay to leave their money at thebank, you will see...

So it's a pretty dangerous thing to do, and they know it. You would need to do something like this, but only for foreigners, which is pretty hard to do in an open world like today. They already talked about it, and told they don't see how they could do.

I think they will enforce the PEG, and E/C will again stay at 1.20 for a long period. They wil try to talk down CHF, which will not work.
After all, the more they create CHF to buy EUROS, the richer they get (with EURO debt, which may not be that nice...) so what's the problem ?

CHF may stay at 1.20 almost ... forever. The way out of all this would be for Switzerland to... join the Euro at an exchange rate of 1.20. I don't think they want. Maybe one day, they'll resign themselves do it.

EDIT: Or the other way out would be for CHF interest rates to stay low and EURO interest rates to go UP. But when will this happen ? Will it ever happen, seen the amount of debt EURO nations have, higher interest rates means higher interests on all the debt.

Having learnt a lesson last time when EC briefly breached 1.2000, I really like to share my view with some of the more optimistic traders here.

I beg to differ with the opinion that going long EC is a very high reward-risk trade, even at this level...

Let's not discuss about the reward side which, in my opinion, is really capped due to fact that SNB will need to unwind their reserve and retail investors taking profit etc. Let's just focus on the risk side for now:

How many of you think the floor breach last time was purely accidental / operational and that the seller of EC @ <1.200 was NOT aware of the fact that SNB was holding a floor with continuous stream of bids @ 1.20 meaning the seller immediately lost money the moment he hit the sell button? I remember reading reports afterwards saying the seller "did not see SNB's bid"...lol

FX really is a zero sum game... To win some big money home the best you could do is to shoot down the biggest giant. In this case, the biggest giant is the SNB (plus those countless retail investors who are riding on SNB's back - i.e. you and me)

Probably this time round when the floor is tested again, we have all learnt a bit from two years ago and put our stops further away from 1.2000.. however, with everyone putting their stop @ 1.190 doesn't really help much in stopping the big players from hunting us down! All they need to do is to fix two or more deals less than 1% below the floor and hold it longer this time or do it a few more times. This will surely trigger a sea of stop orders putting a huge amount of selling pressure until all our stops are wiped out again. With little liquidity below < 1.1990 (probably SNB would be the only one sitting on bid side, I'm not sure their system will be operationally able to handle), EC price will easily pierce through 1.2000 and lose 3-4% of value before the market stabilises and quickly rises back to 1.2000 where SNB is still continuously (and passively) spitting out bids @ 1.2000.

For those of you who squeeze your margin to the least @ 1.2000 will all be dead and probably those stops @ 1.199 were all executed @ 1.17 or below because there was no liquidity all the way down from 1.20 to 1.17... and your orders will be hit only when the big players are happy with how much we are being robbed and decide to save us by spitting out bids @ 1.17 (when SNB bids all been taken out and not able to refresh their bids in that one single second)

So don't go all in! Even if SNB is not going to abolish the floor, this is not SNB's promise to protect our EC lengths!!

Rest Assured Mr. one post from April 2013 that the last time it breached 1.2000 by some 5 pips, it happened in some not all brokers price feeds.
SNB quickly explained the reason.

There are big players to a limit which is the SNB Peg 1.20. Stop dreaming of nonsense scenarios that will never happen. Do you really believe that SNB had not thought of all those possibilities you are imagining!!!? 5 pips breach of peg for once is not like 50-300 pips!! It will never happen, full stop.

Whatever you think, there' no other option to trade EC than Longing it at current levels.......

I see EC may dip to around 1.2020 but not more just to set a monthly low, possibly long term one too then spike upward before SNB and more for afterwards.......

The guys who are worried much about peg break, why not use the left piece in your minds to think how to make money from longing EC in the mean time

SNB never said there could not be a 5 minute breach of 1.2000
If they have ever said that, really appreciate if you could point it out where and when.

All they say is, they will maintain a floor of 1.2000 - meaning, they will always bid @ 1.2000. That's it.

If I am worried about peg break, I don't think about how to make money from EC length, i think about how to better manage my tail risk.......

Folks here like to go retarded from time to time!!! What logic are you starting from!!!! If in an agreement there's no mention of DO NOT ABUSE OR CHANGE ITS POINTS, that gives you a reason to commit fraud. There are millions of IF IF IF, must it all be mentioned even in big companies agreements!!!

SIMPLY, SNB said it will defend the peg 1.20 FULL STOP

Some think they are playing playstation or Roulette in the Casino, as if SNB will wait for 1.20 and try its luck at same instant if it will buy unlimited foreign reserves or play rope pulling with EC bears or Swiss Franc buyers.

PPl this is a Central Bank. There's a reputation and Credibility out there, not boy games of IF!!!!

By the way, the nonsense Saxo Bank had done is a repeated step by some brokers done the same when EC was near 1.20. And, they say protect clients by increasing margin!!! They have already blew some accounts probably and looking after the others. Shame on such disgrace action to come from a bank!!!!
Many traders will think million times before depositing with it after this news!!!!!

After the brief breach of peg two yrs ago, SNB replied to the media by the same mantra "we are ready to defend the peg". If you think this is a golden ticket to wealth... go ahead and there is no good using words like retarded etc.

From your point of view, the breach should have never happened last time. Sounds like you hope they have learnt from last time and so this will definitely not happen again? Im not a hopeful person.

Everyone is free to express their views verbally here or financially by taking positions. So dont get too personal.

good point, increase margin by SAXOBANK from 2% to 8% for all chf positions in one week it is more then theft, it is criminal for every trader, but we will manage

Wow, there is quite a few extreme views here. Liquidity vacuums, WW3 and not mention personal attacks on posters. I know we should plan for the worst case scenario, but don't always expect the extreme case to happen tomorrow! Jeez calm down, the sky is not falling on your heads.

Lets see if we can discuss a more reasonable scenario in a constructive manner.

So to get things started, what are the main forces affecting this pair:

1. EUR: Low interest rate
2. EUR: QE by the ECB
3. EUR & CHF: Ukraine crisis
4. EUR: Dismal growth and low inflation
5. CHF: SNB intervention to maintain the peg

What else?

It's been going down since May 2013.

Yes the downside is probably going to be defended by SNB at 1.2 - so what. Does that signal a buy - No.

I totally agree.
It would with a nice positive swap, which was the case at the very beginning of the 1.20 PEG, but now this position will cost you money and nothing tells it may go up.

6. EC in Long term downtrend.

A good day from Switzerland

First of all: There was a clear statement from SNB, that back at eastertime i think it was 2012, SNB always had yards of bids at 1.20, even when lower prices were traded. This was caused, due to a lack of creditlines with SNB over EBS during Asia-Trading-Time. This issue was adressed by opening an singapore SNB-Branch, to avoid similar cases in future. I had a stop at 1.1999 at a swiss bank, got filled and afterwards the filling was reversed, due to the fact, that there was always SNB at 1.2000. Nice and reasonable move from my bank! ;-) I shifted the SL to 1.1995, but i'm sure, prices under 1.20 won't be traded in short-midterm future.

In my opinion, there is still no economic sign for SNB to remove the floor. Deflation risks still here, GDP-groth revised downward, industrial sector still in need for floor. Even the housing bubble was now declared to be non existent by ETH-Zürich. So another reason to keep the floor and to probably add new stimulus. I expect SNB to introduce new measures at the next SNB-Meeting. Otherwise i expect EURCHF to remain around 1.20 - 1.21 for the upcoming future. Which would be ok for switzerland as well.

I have to admit, that i'm still the hell long EURCHF and missed to sell them at higher prices. That is caused by my opinion, that i want to start to sell my EURCHF at around 1.30. Still i made some scalping, but in the end i'm still at a significant loss at these levels yoy. Also the negative swaps did not compensate for my losses on the position. ;-) Now the negative swap has eroded and takes now place in USDCHF. But still, there is no reason to pay for your EURCHF long positions. https://www.db-markets.com/#fx_rates/forward

Fortunately i decided to open some USDCHF at 0.90. I intend to let them run as well, due to the fact, that we have encouraging signs from the US economy and the fed in the US. I was long USDCHF when we were almost at 0.87. So i had a nice loss at my position back then. But now it turned out well.

To conclude: I'm still heavily EURCHF long and missed to sell them without covering. I don't expect the floor to be broken so i keep my 9 EUR. SNB will print as much as they want. USDCHF is more in my favor than EURCHF. But EURCHF is still my larger position, as the risk is now limited to the floor. So i hope the market to keep on bashing EURUSD, that leads to increasing USDCHF and gives the EUR-Zone a better setup for increasing exports.

Not sure about Ukraine. But i hope it won't be a too cold winter in Switzerland and Europe! ;-) Time is ticking in favor of russia.

Last thing. Question to all chartists among us: We have the once important 200 day line around 1.22. What if SNB manages to hold EURCHF above this line? Will we see a sustainable uptrend then?

So have a nice day everybody and enjoy the upcoming weekend!

Best

Swissie

@Swissie

Thanks for your input. It's good to hear some info from the Swiss economy.

To reply to ripper. No.. ec breaking 1.2000 is not the end of the world. If it ever happens again it will still just be a usual day. Some retail investors losing whole of their capital isnt anything unseen... it happens every day.

Also to add to your list of factors, please also consider the exceptionally strong real estate market in switzerland. For more details pls google ubs swiss housing index. There is no way snb could hugely reduce interest rate atm as this would certainly exacerbate the potential bubble.

Im personally long in ec as well. However holding a view is really quite different from fully emotionally and financially committed to the position?