Intraday Market Thoughts

EUR/CHF Squeezes Higher, Euro Rebounds

by Adam Button
Jan 26, 2015 23:58

Markets were active but failed to grab a clear theme to start the week as New York is hit with a massive snowstorm. The pound was the top performer while the Swiss franc lagged badly. Australian business confidence highlights a quiet Asia-Pacific session.  17 days after the last of our Premium AUDJPY shorts hit its final target, has the pair got any more downside left? We answer with 2 new trades and 3 charts in the pair.

A rally in EUR/CHF to 1.0170 from 0.9800 in Europe was the highlight of the day. The move started after the SNB reported the largest one-week rise in sight deposits since March 2013. Ostensibly, deposits would count as inflows into Switzerland by there was talk about financial engineering to reverse it via swaps or debt repurchases.

Overall, EUR/CHF is a murky trade because technical limits are loosely defined, fundamentals don't matter in the short term and flows can be enormous. The trade so far has been to ride the momentum but many traders are staying away until the dust settles.

Overall, the euro was generally stronger despite the Syriza win. Compromise from European leaders about maturity extensions and lower yields may allow everyone to escape unscathed and that helped sentiment but it was clear that euro sellers were present at 1.1280 and 1.1300 so rebounds will be hard pressed to extend.

That pattern is also clear in USD/CAD as chatter mounts about a second BOC rate cut. The OIS market now sees a 30% chance of a cut at the March meeting. USD/CAD slides have been short-lived and a dip near 1.2400 was bought aggressively and pushed the pair to a fresh cycle high of 1.2487 late in the day.

Up next, the Australian dollar is in focus with NAB Business Confidence due at 0030 GMT. There is no consensus but the prior reading was +1. Japanese small business confidence is due at 0500 GMT as well. Neither report is likely to impact the market.

Act Exp Prev GMT
NAB's Business Confidence (DEC)
1 Jan 27 0:30

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