After the SNB announced that it will defend EUR/CHF at 1.20, it has stayed above this level. The timing for the SNB could not have been better because the EUR has been falling, and continues to fall this week. With what is effectively a peg, the weakness in the EUR means weakness in the CHF, and we are seeing that in the markets.
The EUR/USD held below 1.40, and is now at the 1.38 level heading into the Friday US session. The 1.3450-1.3460 area is the next support zone, and there is a good chance at the moment the market is looking even lower (towards 1.30) after Trichet's hinting of possible rate cuts due to weak growth, although it might not be during his tenure as the president of the ECB, but rather a task for Draghi, the next in line.
With the SNB tying the Swissie to the Euro, the slide in EUR/USD and in other EUR-crosses directly translates to a slide in CHF. We see the USD/CHF continue to rally after the SNB's announcement. It has racked about 250 more pips on the upside from a consolidation area near 0.8560 to 0.8810. There is no significant resistance until 0.93 then 0.99. The other side of the CHF-weakness story is going to be strength in the USD and JPY. The JPY because it is the next strongest safety currency, and the USD because it is also a safe haven currency that has QE3 off the table for now.
GBP/CHF is also strong continuing for another 350 pips of so from the 1.37 consolidation level after the SNB announcement to 1.4050 as we start Friday's US session. We do have an immediate resistance ahead near 1.4150, near the lows from Feb Through April.
EUR/CHF is staying above the 1.20 level with a little breathing space too. At 1.2160, the market continued rallying about 100 pips higher from the post-SNB announcement consolidation level around 1.2060. As we stay around 1.20 in the EUR/CHF, the CHF will be going with the ups and downs of the EUR. Currently, the market is pouring out of the EUR, and thus we should continue to see weakness in the Swiss Franc.
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Fan Yang CMT
Chief Technical Strategist