By: Christopher Lewis
EUR/CHF is probably one of the most boring, yet talked about markets in the Forex world at the moment. This is because of the well publicized “minimum acceptable exchange rate” of 1.20 set by the Swiss National Bank, and as a result many traders have been waiting for the market to test the level for support. The pair recent hasn’t been moving much, as the level simply is too strong for the market to break down, and there is also a real chance of the Swiss National Bank acting clandestinely at the level.
The pair has been frustrating to many of my friends as it simply hasn’t broke down enough to trigger intervention, but hasn’t exactly moved higher for the most part either. The easiest trade is to buy this pair, and close it out after a 20 pip gain. However, the Thursday session saw an actual attempt to break this pair down.
No Intervention, Yet
I think it is only a matter of time before the Swiss National Bank has to get involved in this pair. Any serious break of the level will be seen as an attack on the integrity of the central bank, and they know that if they don’t hold the market up – the market will push this pair down to 1.10 in a heartbeat as it is overvalued.
The hammer-like candle shown at the close is interesting as well, as it suggests supportive action. I think it is more fear than support at this point, but none the less – it means the same thing sometimes. The pair does pay a positive swap, so someday this will be a great long term buy and hold.
The selling of this pair is absolutely impossible because of this, and unlike many traders that I see posting on the forums – I am not willing to take on the central bank. In fact, I think buying small positions is still the way to go. I see the pair running to the 1.24 level on intervention, and as such I have a take profit order up at that area.