Swiss Franc Likely to See Major Breakout Versus Euro

The countervailing forces of Swiss National Bank intervention and financial market flights to safety should make for another eventful week of Swiss Franc trading. A busy week of economic event risk likewise promises no shortage of excitement, and FX Options markets are pricing in the most EURCHF volatility in nearly a month. The major highlight will likely be Thursday’s Swiss Consumer Price Index report. Given the SNB’s resolve to prevent CHF appreciation in the face of deflationary pressures, any strong surprises in either direction could force considerable price movements. Consensus forecasts call for a 0.7 percent month over month gain, but the annual figure is expected to show contraction at -0.7 percent. Pressure remains on the SNB to stave off deflation, but a considerably above-forecast print would almost certainly ease said pressure. Traders will otherwise look to Friday’s combination of Swiss and US Employment numbers. Suffice it to say, any and all surprises could force substantial financial market volatility. Given the increasingly narrow week-to-week ranges in the EURCHF, one gets the sense that the pair is preparing to make a substantial break in either direction. - DR