EUR/CHF

Quarterly bulletin has now been released:

http://www.snb.ch/en/mmr/reference/q...omplett.en.pdf

This includes the wording "take further measures immediately"

Other interesting notes:

"In recent months, exchange rate movements in the Swiss
franc have been shaped by the ECB’s measures to
ease monetary policy, by the conflicts in Ukraine and the
Middle East, and by the minimum exchange rate for the
Swiss franc against the euro. The euro weakened against
most currencies, although owing to the minimum
exchange rate, its decrease against the Swiss franc was
relatively slight. Thus the Swiss franc appreciated a little
against the euro while depreciating significantly against
the dollar (cf. chart 5.4). At the end of August and the
beginning of September, one euro was at times fetching
just under 1.21 Swiss francs, the lowest figure since
the end of 2012. It did, however, remain slightly above
the minimum exchange rate of CHF 1.20 per euro, thus
reflecting the credibility of this minimum rate"

and

"The export-weighted real external value of the Swiss franc
continues to lie considerably above its long-term average,
and has changed only slightly since the introduction of the
minimum exchange rate."

The lack of note about raising the cap was also quite interesting!

please give me a link where is Snb talking about rising cap?



Regards


Muhammad Mudasir

The SNB never mentioned anything regarding raising the peg price. That's an all time TROLL who longs EC at off market prices

EC moved greatly yesterday, scalped the hell out of it as had been doing before and after the SNB recent meeting, just want it to go back to 1.21 to close my Super Super Heavy Long(to use its lots on current levels) there that i left before SNB betting on negative rates least before SNB failed to do anything other than its boring utmost determination as usual.

After closing my up position, let it go down to 1.2070 and stay here for months if not years, I'll send a letter to Jordan for this purpose, we don't want his intervention or negative rates if it stays here playing on current levels like it had been doing for this week up/down for 5-10 pips that worth much more than any intervention in the long run

***I believe EC may go naturally up in October to test 1.2175-80 least despite I prefer it staying at current levels as mentioned before...

well this is a dream we all dream of ....

EURCHF trading in a narrow range, as depicted by an ascending trend-channel formation on 1-hourly chart.
But looking at the bigger picture and considering the recent sharp fall, the ascending trend-channel seems to constitute towards formation of a bearish Flag chart-pattern. Expecting a sharp fall towards 1.2000 psychological mark once the pair breaks below the lower trend-line support of the ascending channel near 1.2070 area.

I think you draw it wrong. Of course it could be a channel, but what is more important are the horizontal levels of S/R.
We have support at 1,2063 and heavy around 1,2050 and resistance around 1,2090 for the moment.
If it breaks 1,2050 then we will get close to 1,2000, if it breaks above 1,2090 we will probably break free of further 1,2116 resistance.

"Psychological mark" ? A currency peg is anything but that. I don't even believe it can trade lower than 1.2050. Who has the capital to play against a central bank will likely find a better way to use it.

The point I am trying to make is the formation of a bearish flag chart-pattern, which although resembles an ascending channel but actually suggests consolidation phase ahead of another down-leg, once the pair breaks below the ascending channel.

Sorry paz i think what you saying cannot be further from reality. Not everyone trades EC directly.Any capital inflow and outflow initiated by investors involving only EUR or CHF already moves the pair. Example, a hedge fund decided DAX is bearish and switched to SMI is effectively selling EC. (As a matter of fact pls look at DAX and SMI stock charts you will see SMI isore bullish)Example 2, you live in greece you decided the buy a property in london by selling 1M of your existing greek house. If there is no matching ouflow from CHF to GBP, you have effectively sold EC.Both SNB and ECB have slashed rate to zero but with ECB purchasing debt vehicle meaning ECB is more willing to facilitate monetary expansion. For every euro created by ECB which went into UK or US etc but without a matching capital outflow from CHF, EC is being sold as well. Looking at the EC technical chart its harder to say whether this is a consolidation to get ready for a dive into 1.200 however if you look at weekly chart its definitely a strict linear downtrend line. Its really erroneous to think everyone trades EC and that EC is only driven by EC traders.. As a matter of fact, when you want to sell a euro asset no one really will think about taking out a loan in CHF and then converting back to euro to neutralise the short euro position you are creating by selling the euro asset!

Don't confuse yourselves ppl. Imagining that any house property whatever sold or bought affects EC. Take it easy!

It's simple as when UJ went down to historic lows. The pair going down just because whoever is selling it have much money and very stubborn to test SNB willingness just as UJ bears tested many times BOJ willingness.

Anyone still remembers that the world hadn't real change from few years till now when UJ rose sharply to current 109.
Same war problems, conflicts, terrorists everywhere!!!!.......But UJ reached to 109 only because the decision was made and all bears disappeared suddenly.

The market is a big MAFIA game, big boys work together to take part of the cheese, when the main player tells them you ate a lot, we are now very serious with strict decision, time to go enjoy life with that money, they all disappear!!!

If you think other than this, going to fundamentals whatever then you are wasting your imagination on nothing near reality.

Can always find a technical reason for any pair bullish or bearish movement because this is the nature of market trading, if it does not do this, it will do that.......

Unless it slides today to the 60(as PA and momentum now turning bad), it will still be in good shape on weekly and surely monthly as long as closes today above 70 and next week month end any level above it too would be good.

On other times frames, EC is very bearish but as we all know, one spike up from nowhere can change all the chart and regain same sideways trading looking to 1.2115 again.

I always asked why Mr. SNB don't spike EC some 50 pips from time to time just to warn bears that it is around watching???
BOJ used to intervene 400 pips for God Sake. What is SNB doing??? Thinking it's funny looking at EC being dragged down to near 1.20 then it will play pull and push with bears for 10-20 pips?!!!

Is SNB that stupid?!!! After all this time of reckless decisions, I believe it is more than stupid, can say retarded!!!!

I believe despite Huge Pressure going on now on 1.2066, this is a good sign that serious decision is being taken.

Same movement like now reminds me of near the peg movement for pairs that had been pegged.

Clearly SNB is intervening slowly raising support levels gradually. At least this is what market price action showing.
But it means nothing if no big spike up would happen to decrease downward pressure. Or else we may at best get stuck on this level(as if it's the peg) for 2-5 pips including spread in daily movement until something new happen!

Deja vue?
SNB Jordan in Geneva:
JORDAN SAYS SNB WOULD TAKE EXTRA MEASURES IF NEEDED
JORDAN SAYS INT'L ENVIRONMENT HAS WEAKENED
JORDAN NEGATIVE INTEREST RATES IN ARSENAL OF SNB TOOLS
JORDAN SAYS SNB WOULD TAKE MORE STEPS IMMEDIATELY IF NEEDED

He also said the SNB "won't exclude any measures to ensure price stability". Although expliciately stating negative rates are an option, clearly the market doesn't care. It takes a lot to push this pair up 10 pips, let alone back to the 1.23 - 1.24 range.

Guys take a look at the Euro chart. Euro and its assets are under a constant and immense selling pressure. Obviously hedge funds are helping the SNB by creating the necessary short capital flow from CHF to match the EUR outflow on basis that SNB should be able to hold the floor. Once thereis a slight shake in confidence the CHF would strengthen worse than a stampede because now mostly the EC is using purely market force to maintain a "balance".

Have a look at SNB balance sheet: Seen how much the SNB has EUROS in reserve, when EUR goes down, it now drags the value of CHF because of this.
SNB doesn't need any help, they can create as many CHF out of thin air as they want. So if they need to buy EUR at 1.20, they can buy as much as they want, they don't have any limit.

Mevo, don't get me wrong. I do agree most likely... 1.2000 will be largely successfully been defended. The idea I'm expressing here is the fact that the market is acting against the floor and there is a tail risk chance that things can go wrong so that, somehow, the 1.2000 is breached or abandoned. It's really a tail risk in my opinion...

Two points I'd like to make basis your comment:

1. Don't agree the value of a currency is mainly a function of central bank's balance sheet. And I certainly do not agree CHF value will be dragged down because SNB is holding EUR. Not digging into details here because it could be the title of a textbook.

2. SNB already made it quite clear they would not intervene until it reaches 1.20000. And yes, indeed I agree the SNB could print an unlimited amount of CHF to fend off any attempts to trade below the floor. HOWEVER, I will be very worried when SNB's balance sheet increases indefinitely. One question is... will ECB allow that to happen?! Also more worryingly, an unlimited amount of EUR holding means the SNB needs to get rid of the umlimited amount of EUR by selling it back to the market into the future time (n) where n tends to infinity. Meaning.... the SNB will have an unlimited amount of FX reserves to permanently peg EUR to CHF @ 1.200. (Mathematically speaking of course since you introduced the concept of "no limit". I will be very worried about my length opened above 1.210 if that's the case.

Uslfd, sure, we approx. agree. The SNB can defend the 1.20 floor IF THEY WANT. I guess it's the only real parameter. My worry is that they stop enforcing the floor for one reason or another. And that would hurt a lot of people, me (and probably you) included. You could even imagine that they sell their EUR to all the people buying EUR/CHF without telling anybody, and could then sell more to get short EUR/CHF and take everybody by surprise by removing the floor to cover all their shorts with the stops of buyers. This would be a really dirty move and is SUPPOSED to be "impossible". I have absolutely no trust in central banks, even if the SNB is probably the most trustable out there.Technically, nothing prevents them to do such a thing.

1. The "value" or valuation (aka "price") of anything can be debated and it indeed depends of which way you see things. It's a little bit like gold for example: should you value it depending of its cost of production, on supply and demand or on the uses of the metal ? To make it short, a fiat currency isn't a commodity, but a financial transaction beetween the holder and the issuer, which is the central bank. You can see its "market" value and argue it mainly depends of supply and demand (and/or maybe the trust in the currency) and see its "intrinsec" value, which may be seen as the assets held by the central bank issuing it (and/or the total amount of goods and services the currency can buy). I agree that talking of intrinsec value for a fiat currency is highly debatable as it isn't redeemable against anything at the central bank since a while now.

2. Today system implies that central bank's balance sheet's trend is +unlimited. And because of interests it's going exponentially.

What do you want the ECB to possibly do ? Buying big quantities of EUR is the SNB's problem, not the ECB's one, and I really don't see what they could do against it.

Buying unlimited amounts of EUR tends to lock EUR/CHF at 1.20 (ok, if you agree with the value of the currency linked to the central bank's assets). This is how "boards" (I guess it's called like that) work: when a currency is pegged to another, the central bank buys 1 of the currency it's pegged to, every time they issue (x) of their currency. (x) being the parity of the peg. Think Saudi Arabia, Hong kong or Panama with the US dollar: These central banks hold as many US Dollars as they issue their currency (with the fixed parity conversion). So holding these currencies is "as if" you were holding US Dollars, because you do it "indirectly" through their central bank.

The same will happen the more the SNB buys EUR: By having CHF, it's like having EUR, through the SNB. You are totally correct by thinking the more this game goes, the more it would permanently peg EUR/CHF to 1.20

I guess there are 2 scenarios:
A) ECB raises interest rates with SNB keeping them at zero and it makes EUR/CHF move enough thanks to the demand of EUR, to allow the SNB to resell their EUR like you say.
B) 1.20 PEG (and not floor anymore) will become permanent at one point, or Switzerland could even decide to join the EURO at an exchange rate of 1.20 in the future as an exit strategy of this.

Some very great comments!

To add to your discussion... sharing below 2 graphs depicting the differences between the two areas' debt to GDP ratios.
A bit like Japan, probably the only way for EUR to service its debt is to inflate its money base through monetary means by lowering interest rate to negative r% when necessary... and hope they could, at the same time, print their way out of deflation. So making the first scenario you described less likely in foreseeable future...

Very funny I'm constantly posing as an extremely bearish person here while I'm still sitting on some EC lengths bought prehistorically. Maybe we all share same faint hope that somehow things will get better from here... :')




http://www.tradingeconomics.com/char...dp&d2=20140806
http://www.tradingeconomics.com/char...dp&d2=20140508