1. Having watched the 1.08 level closely post-brexit it certainly looks as if there is some FX intervention going on at the 1.08 handle - suspicions enforced even more as SNB President Jordan says FX intervention is on the cards should CHF move even higher/ Rate cut possible another 50bps.
2. Plus EUR vs CHF september rate expectations are skewed for a long EUR carry going forward + already EUR is more attractive than CHF (-0.4% vs -0.75% depo) - 1m CHF Libor currently pricing 25bps at 19% vs 1m EUR libor pricing 25bps at 12%.
3. is also v low so risk of downside is limitted, plus SNB are clear they will can intervene so the chance of long-term losses with this trade are close to 0.
Trading Strategy - buy EURCHF <1.0799 dips 1.081/5TP:
1. Buy EURCHF on any dips below the 1.08 level, maximum of 100pips TP but much more advisable to take 50 or by looking at the intra day moves even taking 10-20pips is possible several times a day as the market constantly moves higher after ANY dipping below the 1.08 handle.
- i wont be running a stop on this trade given the SNB's commitment and low IV and HV.
SNB Jordan has been very dovish recently and has said 1) FX intervention is possible/ on the cards 2) further cuts to the depo rate if necessary to reduce CHF strength - so both of these comments support any long EURCHF positions.
Plus ECB have turned somewhat more hawkish/ neutral as they reach full capactiy in their easing (much like the BOJ) so imo the SNB is more likely to make moves in september than the ECB - the rates market echos this sentiment and SNB President vs ECB president comments also support this (e.g. jordan alot more forth coming about easing/ intervening) - also of late EUR CPI has ticked up to positive from negative for the last 15months so this could be the start of a underlying inflation trend - more good news for ECB.
Anywho, I digress, this trade is/ was a technical 10-50pip recurrent trade which can be made several times a day as from what i see in price action there is some suspected intervention at this level AND i like eurchf topside anyway given the macro environment (some explained above).
Where do you see USD playing into this? USD should strengthen medium-term, and a strong dollar, as I understand it, will lead to less appreciation pressure on the CHF.
As always thank you for your superb analysis.
Er, im not sure what you mean RE usd? with this particular trade/ dynamics it doesnt have any affect on USD - not that i can see anyway.
What do you mean?
thanks for your compliments and intellectual discussion!