The USD/CHF pair has been drifting sideways for the entirety of 2013. In fact, it did it in 2012 as well. This is why I have done very little analysis involving the Swissy this past year, and predicting the move in 2014 is certainly going to be a challenge of sorts. However, you have to keep in mind that this pair will move counter to the EUR/USD pair, and that market can sometimes help a bit with the analysis of this one.
The Swiss National Bank had the audacity to put a “floor” in the EUR/CHF pair a couple of years ago, and so far it has worked. This was to weaken the Franc, as it has been far too strong for the Swiss to export to their biggest trading partner, the European Union. This has had a “knock on effect” in this pair, and you can see how flat it has been since then.
The Federal Reserve is bigger than the SNB – don’t forget that.
The tapering question in America is a much bigger one than Swiss exports, and quite frankly the Swiss are in trouble if they are hoping to “win” a currency war with the Americans. Because of this, the SNB is essentially in damage control mode constantly. The recent action suggests that we could very well see something significant soon.
The 0.88 level is where we are working on in mid-December as I write this. It looks as if the next 200 pips or so to the downside should be considered significant support, and because of this I think the market will test it. If the Fed suggests that the Americans will have to extend quantitative easing, this pair will fall. It will be in reaction to a strengthening EUR/USD pair, and I do think this is going to happen early in the year.
However, the 0.70 level below is massive support, and I think the Swiss will be able to contain the damage. This area will not be broken, and I would expect the SNB to do something drastic again if we get close at all. This pair will bounce from there, but not after serious technical damage by the bears.
