- During the trading session on Wednesday, we have seen the euro initially drop against the Swiss franc again, but as we have seen multiple times, there seems to be a certain amount of support near the 0.9325 CHF level that is extraordinarily stubborn.
- I believe that the support probably extends all the way down to the 0.93 level, so therefore I think you have a “range of support” in this general vicinity.
That being said, you should keep an eye on the 0.9425 CHF level above, because that is an area that has been massive resistance. In short, we are in a 100 pips range in this pair, which probably is not a huge surprise, considering that the pair does tend to grind back and forth. Because of this, I tend to use a lot of range bound trading in this market, just as I do in the EUR/GBP pair. Both of these tend to be very noisy and choppy, but the sideways action can be taken advantage of if you are patient enough.
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Risk Appetite
Keep in mind that although the euro is not necessarily considered to be a “risky currency”, there is more risk involved in holding European assets over Swiss assets. In other words, if it’s more “risk on” during a particular trading session, it makes a lot of sense that the euro would gain against the Swiss franc. Conversely, if there is a lot of concern out there, then it makes a lot of sense to see the Swiss franc strengthen as people run to the safety of the Swiss banking system. This is the longer-term correlation that we have seen, and this is a pair that the Swiss National Bank pays close attention to.
The Swiss franc starts to strengthen too much, then you have to have a serious conversation about whether or not the SNB is going to get involved, which they have done multiple times in the past. All things being equal, buying this pair here is just simply a continuation of the same sideways action.
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