Buy the Dip in EUR/CHF?
- SNB introduces negative deposit rates
- SNB remains very committed to the floor at 1.2000
Unfamiliar with Gann Square Root Relationships? Learn more about them HERE.
The Swiss National Bank announced on Thursday that they are going to introduce negative interest rates on deposits (-0.25%) in an effort to make the Franc less attractive. The timing of the move was a bit strange as the SNB held its quarterly policy meeting just last week. If they were going to go through with such a step wouldn’t it have made sense to announce it then? Clearly the move was reactionary and our guess is that the ongoings in the Ruble and its related flow impact probably put the cross under more stress than they had anticipated which in turn forced the Bank to act when it did. Whatever the case may be, the SNB’s commitment to the 1.2000 floor in EUR/CHF is clearer than ever (it is also worth noting that the SNB confirmed they had been intervening in the cross in recent days). At some point we believe market forces will force the SNB to abandon the floor, but that looks a long way off. We like buying EUR/CHF around these levels, with a stop around the lows of the week.
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EUR/CHF Chart: December 19, 2014
Charts Created using Marketscope – Prepared by Kristian Kerr
Key Event Risk in the Week Ahead:
LEVELS TO WATCH
Resistance: 1.2045 (Dec 2nd High), 1.2095 (MTD high)
Support: 1.2010 (Gann), 1.2000 (Floor)
Strategy: Buy EUR/CHF
Entry: Buy EUR/CHF at 1.2030
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail firstname.lastname@example.org. Follow me on Twitter at@KKerrFX.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.