This
may seem like a strange question on a morning where the USD/CHF has rallied
over 700 pips to over 0.8500 and EUR/CHF has catapulted from just 1.1000 to over
1.2000. But initial reactions have a way to contracting if the support for the
momentum is not verified.
The Swiss National Bank (SNB) had - up til now - talked a good game to slow the strengthening of the
franc but after a short period of inactivity, the franc began to resume it’s
bullish ways. As the three-day U.S. Labor Day holiday ended today, the Dow
Jones futures were already down over 200 points before the open, which would
have put intense pressure once again on the franc and yen. The Swiss seem ready
to support a EUR/CHF exchange rate of at least 1.20 francs. With the exchange
rate at 0% and the Swiss willing to print francs in whatever quantity needed in
an effort to defend the 1.20 peg, the SNB has signaled that it’s not just talk.
The slower economic growth stemming from the strong franc hurting imports has
driven the SNB to taking action despite a $21 billion franc loss in 2010.
The question for traders and investors now is where will the safe
haven play move to? For now, it appears that it will be the Swedish krona and
do not rule out the U.S. dollar.
Past
performance is not indicative of future results
The USD/CHF daily chart shows the
rally that the SNB has triggered as they are no longer willing to see the EUR/CHF
trade below 1.20.
Will the SNB ultimately be successful? Yes. If traders can move onto
other safe havens (gold, U.S. treasuries, krona) in this risk off environment,
the franc could continues to weaken. The 1.20 EUR/CHF peg is going to be tough
to maintain as the euro pressures to IMF and EU to delay what many analysts say
is inevitable: A Greek default. Consider that the Greece’s sovereign debt
represents approximately 180% of 2012 GDP. Economically is makes sense for the
IMF and EU to cut Greece lose. It’s likely also to be a political maneuver as
well.
If German law finds that that the EU bailout was unconstitutional
(the court decision is expected to come Wednesday) then it’s a certain unceremonious
exit for Greece; this has the EUR/USD sliding as the dollar also rallies
through 76.00 with the Dow Jones sell-off today.
As an active forex trader and Chief
Currency Analyst for InterbankFX.com I do write for a number of sites all over
the web and I am happy to say that I will be posting updates atwww.IBFXconnect.com. MyActivity Boardwill feature the trades from my trading account as well as
intraday commentary.
Start the discussion! Questions?
Comments. Leave it here at the Daily Forex Trading Edge for Raghee to
personally answer. Using the icons at the top of the article to forward this
update to a friend via email, post it on Google or Facebook or simply print it
out for reading later.
Forex trading is one of the riskiest forms of investment
available in the financial markets and suitable for sophisticated individuals
and institutions. The possibility exists that you could sustain a substantial
loss of funds and therefore you should not invest money that you cannot afford
to lose
Posted By:
Raghee Horner
Raghee Horner, chief currency analyst for Interbank FX, provides her personal daily trading tips and insights through Dailyforextradingedge.com. An experienced trader with over fifteen years in the markets, Raghee is the co-founder of EZ2Trade Software and has taught her brand of technical analysis and charting strategies to students all over the world. She is an international author and has taught currencies, futures, and equities trading for over a decade.
This may seem like a strange question on a morning where the USD/CHF has rallied over 700 pips to over 0.8500 and EUR/CHF has catapulted from just 1.1000 to over 1.2000. But initial reactions have a way to contracting if the support for the momentum is not verified.
The Swiss National Bank (SNB) had - up til now - talked a good game to slow the strengthening of the franc but after a short period of inactivity, the franc began to resume it’s bullish ways. As the three-day U.S. Labor Day holiday ended today, the Dow Jones futures were already down over 200 points before the open, which would have put intense pressure once again on the franc and yen. The Swiss seem ready to support a EUR/CHF exchange rate of at least 1.20 francs. With the exchange rate at 0% and the Swiss willing to print francs in whatever quantity needed in an effort to defend the 1.20 peg, the SNB has signaled that it’s not just talk. The slower economic growth stemming from the strong franc hurting imports has driven the SNB to taking action despite a $21 billion franc loss in 2010.
The question for traders and investors now is where will the safe haven play move to? For now, it appears that it will be the Swedish krona and do not rule out the U.S. dollar.
Past performance is not indicative of future results
The USD/CHF daily chart shows the rally that the SNB has triggered as they are no longer willing to see the EUR/CHF trade below 1.20.
Will the SNB ultimately be successful? Yes. If traders can move onto other safe havens (gold, U.S. treasuries, krona) in this risk off environment, the franc could continues to weaken. The 1.20 EUR/CHF peg is going to be tough to maintain as the euro pressures to IMF and EU to delay what many analysts say is inevitable: A Greek default. Consider that the Greece’s sovereign debt represents approximately 180% of 2012 GDP. Economically is makes sense for the IMF and EU to cut Greece lose. It’s likely also to be a political maneuver as well.
If German law finds that that the EU bailout was unconstitutional (the court decision is expected to come Wednesday) then it’s a certain unceremonious exit for Greece; this has the EUR/USD sliding as the dollar also rallies through 76.00 with the Dow Jones sell-off today.
As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.
Start the discussion! Questions? Comments. Leave it here at the Daily Forex Trading Edge for Raghee to personally answer. Using the icons at the top of the article to forward this update to a friend via email, post it on Google or Facebook or simply print it out for reading later.
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose
Raghee Horner