Currency Analyst since 2010

EUR/CHF with Mark Jensen

   By Mark Jensen

There’s much talk about EUR/CHF this days. Personally I’m not a big fan of this pair, but being Swiss I feel obliged to provide a short analysis on the matter.

To be fair, there’s something to write about. EUR/CHF slid to the lowest levels since 2012. The pair was rejected down from 1.2140 at the end of October and was steadily moving down ever since.

EUR/CHF is trading dangerously close to the 1.2000 floor set by the SNB. Downward pressure on this pair is generated by the Swiss Gold referendum which will take place on Nov. 30. The subject of the vote is whether to oblige the Swiss National Bank to increase its holdings of gold from 8% of official reserve assets to 20%.

Such step will make it difficult for the SNB to defend the CHF cap preventing the national currency from strengthening too much. Newspaper polls currently show 44% in favor to 39% against the initiative, so the likelihood of a “yes” vote is considerable. The odds are that EUR/CHF will remain under pressure until the end of the month. I think that until that the SNB will defend 1.2000. Resistance lies at 1.2025, 1.2038 and 1.2060.

If the referendum fails, the EUR/CHF will rise. If it succeeds, the floor at 1.2000 will likely fall. Then, however, the SNB will be forced to take aggressive steps and maybe even cut rates – in future this will send the pair higher.

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