EURCHF Update - Still Willing to Be Short

After writing a few weeks ago that the EURCHF didn’t look like such a great long idea, even with the Swiss National Bank holding their price floor at 1.2000 (EURCHF- Will the 1.2000 Price Floor Continue) we received quite a lot of contrasting feedback on the article. 

Before we look into the received comments, a little bit of catching up on the EURCHF’s trading action over the last two weeks.  Since the post on April 1^st, the EURCHF which had been trading at 1.2050 briefly fell below 1.2000 and hit a low of 1.1997.  Keen Forex traders did point out that the one minute chart of the EURCHF never closed any of its bars below 1.2000, which showed that the SNB was immediately there to support the market. On the drop, the SNB was quick to release a statement that it will continue to maintain its 1.2000 floor. On the fundamental side, Swiss Unemployment was unchanged at 3.1%, while CPI was slightly higher than expected, and Retail Sales were worse than forecast.  Overall, the Swiss economy remains strong, but inflation isn’t accelerating fast enough to warrant the SNB from baking off of their bids.

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Back to the comments. The majority were out saying that shorting the EURCHF with the SNB buying at 1.2000 was a silly move, and don’t fight against a central bank. One guy even went out to calling us idiots on Twitter after we posted we were selling at 1.2040 (for what its worth, that position IS in the money).  The minority, but definitely quite vocal in their opinions was pointing out that the charts were all in favor of a lower EURCHF.  There reasoning fell along the lines of what we had written that the natural flow of supply and demand is showing a steady flow into the Swiss franc.

Looking ahead, we are sticking to our main thesis that ultimately Switzerland’s economic health will  determine what the SNB does.  However, with global demand favoring the franc, the SNB knows its fighting a costly and losing battle that they will eventually need to back down from.  As such, we believe that the SNB will hold 1.2000 for the near future, but won’t be surprised at all if they let the floor break for short periods of time to test out the market.

Lets hear your thoughts