Long EUR/CHF, Long USD/CHF
Last week I was advocating going long the CHF/JPY pair and short the USD/CHF pair. As per the time frames established by the trades, both positions, as well as the USD/JPY short, should have been removed at today's Asian open (time frame was four days including Friday). By a stroke of luck or sheer coincidence, this exit timing coincided directly with the Swiss National Bank's decision to introduce a floor for the Franc against the Euro, essentially removing the Franc from the free market.
Now that it is known that the Swiss National Bank is going to intervene in "unlimited" quantities to hold the 1.2000 exchange rate, markets are likely to test this level. Upon dips below the 1.2000 level, buying EUR/CHF looks to be a strong prospect for gains in the short-term.
Similarly, now that the Franc is no longer a safe haven currency, as it cannot be used freely to hedge against risk, the Dollar is likely to benefit. Although many expected the Japanese Yen to appreciate across the board on redistribution of haven flows, what has culminated has debunked this theory. Instead, the U.S. Dollar, without risk of a direction intervention (save further quantitative easing) like the Yen, is seeing increased demand across the board. This trend will likely continue, and any downside moves in the EUR/CHF could be easily countered with long USD/CHF positions now that it is clear that the Swiss National Bank will be manipulating markets for the indefinite future.
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