CHF weakness limited, via bloomberg?
The EURCHF pair has risen recently on two factors. Firstly, the better risk tone. Secondly, hopes of the €750billion recovery fund being agreed over the weekend. This has led to the EURCHF pair moving above the 1.0700 handle and heading towards a test of the 200DEMA marked on the chart below.
Will EURCHF upside continue?
A key risk for the euro is coming up later today and over the weekend. If we see the economic recovery fund being rejected over the weekend then the 200DEMA offers an excellent place to limit risk for sellers. Any early news of the frugal four/five rejecting the deal offers sellers the chance to sell EURCHF at market. Less surprises are expected from the ECB rate meeting today, but it always pays to be prepared for any surprises.
Thomas Jordan prepared to intervene in the EURCHF
On Tuesday Thomas Jordan of the SNB repeated his willingness to intervene by weakening the Franc. The Swiss export economy is hindered by a strong CHF, so the SNB intervene in the currency markets in order to weaken the CHF through the purchase of Euros and Dollars. This is one of the reasons that the US has labelled the Swiss as 'currency manipulators'. The US treasury cited the nations's high current account surplus and bilateral trade balance as evidence of its manipulation.
However, the intervention by the SNB has had limited success. Despite many attempts to weaken the CHF over the years including huge levels of intervention, trying to peg the 1.200 handle, and having the world's lowest interest rates at -0.75%. As you can see from the chart below the SNB face an uphill struggle. So, the 200DEmA is a key hurdle for the EURCHF to overcome.
