The Swiss Franc has seen a struggle for some time to hold the 1.05 mark against the Euro. From a chartist perspective, but also in the background by the Swiss National Bank (SNB), this mark has probably been defended for some time, one can assume. In their view, the appreciation of the Swiss franc must finally be stopped at some point. Every currency trader knows that the Swiss central bankers intervene time and again. Even if they do not issue official announcements at specific times or volumes.
Swiss Franc weakens due to rising risk appetite
And yesterday, something finally happened. Euro vs. Swiss Franc jumped up, so the Franc is devaluing. If you look at the exact time, it becomes clear what happened. It was shortly before 2 pm yesterday. Then a company in the USA announced (more information here) that there might be good progress with a corona medicine. We wonder if this is just another mayfly that will soon be forgotten again? Anyway, the stock markets used this news yesterday from 2 pm as an initial spark to rise quickly and significantly. Since then, the Dow has risen by 530 points, the Dax by 240 points.
And bang, at exactly the same time yesterday when the stock markets jumped up, the price of Gold fell by a good 30 Dollars. And the Swiss Franc also began to depreciate shortly thereafter. Euro vs. Franc rose from 1.0525 to 1.0662 at last night’s absolute high. To date the price has held up well at this higher level, currently at 1.0639. On the chart we see the EURCHF trend since mid-April. Where investors are becoming more risk averse and are prepared to invest more in equities, the “safe havens” of Gold and the Swiss Franc will suddenly become less attractive and fall.
Other reasons for the current weakness of the Swiss Franc?
In relation to the Euro in particular, it can also be said that the Swiss Franc is weakening because France and Germany have come up with the plan for a 500 billion Euro aid fund at EU level. It is still completely unclear whether and how it will come about. But the desire for it is there, and speculators therefore see the possibility that the Eurozone could be strengthened economically, which is immediately priced in in a stronger Euro. At least in relation to the Swiss Franc, but also to the US Dollar.
Back to the 1.05 mark for the Euro versus the Swiss Franc. The chart shows that this mark has not been undershot for some time. Is it because the SNB has been so strong in countering this with interventions? Rumors on the currency market suggest that the SNB has chosen this mark as a new, naturally unofficial threshold that is defended without official notification. This is to prevent the Franc from appreciating further. According to reports, the SNB has intervened in the currency market to the tune of 440 billion Swiss Francs since 2009 in order to prevent it from appreciating. But since then it has appreciated by a good 30 percent. Well, a hopeless undertaking so far? But for months and years, many traders have been asking themselves: Where has the SNB finally reached its pain threshold? Is it exactly this 1.05 mark? And now it is above all the risk appetite on the global capital market that is helping to defend this mark. But will it take a long time until the trading community pushes EURCHF down again and tries to get to or below 1.05? A heavy, highly speculative bet!