Forex Trading Analysis - EURCHF In Focus

What We Are Watching
Swiss Franc - Swiss CPI & SNB Foreign Currency Reserves
UK Manufacturing Production
Bank of England MPC Meeting
Canadian Employment Change

Swiss National BankWith the EURCHF getting closer and closer to the 1.2000 SNB price floor, Forex traders are awaiting today’s double dose of Swiss economic data (see also: Will the 1.2000 EURCHF Price Floor Continue?). Coming up at 8:00 AM GMT are the SNB's Foreign Currency Reserves, which will be followed by Swiss CPI data 15 minutes later.  (EURCHF bulls like to point out that the SNB has used the day of its FSR release to intervene and send the Swiss franc lower.)

Heading into today’s data, the EURCHF is currently at 1.2030 with selling continuing even as the SNB has made no indications that it is planning on removing the price floor. There is some concern among Forex traders that with volumes expected to be lower as we approach the weekend holidays, the 1.2000 level could be broken if a reasonable sized seller emerges.  With large sell stops rumored to be just below 1.2000, some traders are setting themselves up for a EURCHF spike lower by shorting the pair.

Trading conspiracies notwithstanding, the “real” (sustainable) move in the Swiss franc will be determined by the SNB’s actions. As such, much of what the SNB will do will rest on today’s releases. Specifically, the SNB has pointed out that the presence of near zero inflation has allowed them to keep printing francs to purchase Euros. Therefore, even if the Currency Reserve data reveals that the SNB has been becoming more aggressive with its intervention, as long as today’s CPI remains low the EURCHF price floor would appear to remain safe. On such news, we could see a bounce in the EURCHF back towards 1.2100 as short sellers may take the news to cover their positions before we head into the weekend.

On the other hand, the real fun will occur if the CPI data (0.4% forecasts) rises above 0.5%.  Such news could trigger a downside move below 1.2000.  If that would occur, Forex traders should watch carefully to see what the SNB’s reaction is.  If the SNB doesn’t act quickly to support the 1.2000 floor, it could mean that they are willing to back off a bid from their bids and watch the natural ebb and flow of the Forex markets.  However, if any breach below 1.2000 is quickly supported, that should mean that the floor is safe until next month.

EURUSD

The EURUSD traded lower yesterday following the ECB’s Interest Rate Meeting, hitting a low of 1.3106.  However it has since bounced in early morning trading to 1.3156.  With the Forex markets entering holiday trading, the current upward momentum may not have enough volume to keep the move going.  However, that same low volume may spark a downside spike if the 1.3100 figure is broken

Intraday Support/Resistance  1.3100/1.3175

GBPUSD

The GBPUSD continues to be way off ifs week highs following the FOMC Minutes triggered dollar rally. Like the EURUSD, the pair has rebounded from its lows yesterday, to trade around 1.5900.  However, the pair has met resistance on any moves towards 1.5910.  With the Bank of England set to hold its MPC Meeting later today, it will interesting to see if the GBPUSD can gather enough momentum to break above 1.5915 resistance before the news is released.

Intraday Support/Resistance  1.5825/1.5915