According to my year-old poll, only about ¼ of this blog’s readers believed that EUR/CHF would hold above the floor level of 1.20 for so long. Since September 2011, the currency pair has been demonstrating some really strange behavior — from the points of view of both technical and fundamental analysis.
As can be seen on the chart below, EUR/CHF tried to reverse its long-term downtrend immediately after the Swiss National Bank has introduced the “peg”. The rally only lasted for about a month and then, the Forex pair went down gradually, reaching the 1.20 bottom level by April 2012. The calm period lasted for five months with only three minor disturbances — upward price spikes on May 24, June 29 and August 6. In early September, 2012, the EUR/CHF showed some bullish action, which has ended by September 18, after which day, the pair entered a sideways movement near 1.21 area.
Considering the fact that this currency pair still bears an almost risk-free opportunity (for those who believe in SNB’s credibility) to earn from the positive interest rate difference between the euro and the Swiss franc, it would be useful to know what are the expectations of the average market participants. My personal opinion is that EUR/CHF has a good chance of staying near its current rate of 1.21 by the end of 2012. Additionally, I believe that the Swiss financial authorities will keep the 1.20 floor intact at least through 2013. And what do you think about EUR/CHF?
Where will EUR/CHF end its trading in 2012?
Will stay near 1.21 level. (27%, 9 Votes)
Will return to 1.20. (24%, 8 Votes)
Will break below the 1.20 floor level. (21%, 7 Votes)
Will soar to new highs. (18%, 6 Votes)
EUR/CHF? Who cares! (9%, 3 Votes)
Total Voters: 33
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Please note: the poll will expire on December 23, 2012.
If you have some questions or comments about the future of the EUR/CHF currency pair, please feel free to submit them using the form below.
The EUR/CHF will perform as the Swiss authorities want it to. After a quite long period in which people gradually stop seeing the Swiss franc as a safe haven currency, so equally slowly, differences in the buying power of the Swiss franc and the euro will drive down the Swiss currency by supply and demand. Once investors accept that this is happening, and see that the unbiased value of EUR/CHF is perhaps 1.40, speculation will drive it, albeit erratically, ever higher, beginning likely early 2013.
Interesting point of view. It contradicts the opinions of some market analysts who believe that the Swiss authorities won’t be able to hold it above 1.20. One of the major obstacles named is the inevitably high inflation that would need to be contained somehow.
All exactly according to plan so far. As to Swiss inflation, the Swiss problem thus far is deflation. No problem any time soon.
As for the CHF being an even more attractive refuge, an ever falling currency gradually becomes the opposite of that, as perceptions change. The absolute rise of EUR/CHF to which you refer is to small to be significant.
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The EUR/CHF will perform as the Swiss authorities want it to. After a quite long period in which people gradually stop seeing the Swiss franc as a safe haven currency, so equally slowly, differences in the buying power of the Swiss franc and the euro will drive down the Swiss currency by supply and demand. Once investors accept that this is happening, and see that the unbiased value of EUR/CHF is perhaps 1.40, speculation will drive it, albeit erratically, ever higher, beginning likely early 2013.
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admin Reply:
October 10th, 2012 at 1:07 pm
Interesting point of view. It contradicts the opinions of some market analysts who believe that the Swiss authorities won’t be able to hold it above 1.20. One of the major obstacles named is the inevitably high inflation that would need to be contained somehow.
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David Thomas Reply:
January 20th, 2013 at 4:13 pm
Clive – If things go as you predict would that not make the CHF an even more attractive refuge?
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admin Reply:
January 20th, 2013 at 6:42 pm
Why?
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All exactly according to plan so far. As to Swiss inflation, the Swiss problem thus far is deflation. No problem any time soon.
As for the CHF being an even more attractive refuge, an ever falling currency gradually becomes the opposite of that, as perceptions change. The absolute rise of EUR/CHF to which you refer is to small to be significant.
▼Reply