EUR/CHF: rare and peculiar

EURCHF is a rare cross pair that is nonetheless very interesting both from the technical and fundamental point of view. Let’s throw a strategic look at it to see what we may expect in the nearest future.

Not going too far back into the past, we can distinguish three periods of performance in EUR/CHF.

History: three periods

The first period (marked “1”) is the time when the Swiss franc was pegged to the euro. The price was flat at 1.2050 most of the time. A plunge like never before marks the end of this period – Swiss financial authorities decided to unpeg the franc from the euro.

The second period (marked “2”) roughly corresponds to 2015-2018. During those years, EUR/CHF has been mostly rising. It peaked exactly at 1.2050 and bounced downwards.

The third period starts with the bounce from the strategic resistance of 1.2050 and goes into the present moment. EUR/CHF basically undid all the gains it did in the second period – now, it is roughly where it was shortly after the drop when the unpeg took place.

Fundamentals: support at all cost

So is it going below the support of 1.0520? Unlikely – the Swiss economy depends on European buying. Expensive CHF will demotivate the outside Europeans to buy what Switzerland has to offer – that’s why the Swiss National Bank has been so preoccupied lately to not let CHF appreciate too much. “Too much” means EUR/CHF going below 1.0520: we can see this strategic support as solid ground. For this reason, in the mid-term, EUR/CHF may approach and even dip below this mark, but in the long term the possibility that it will go significantly lower is not that big. For this reason, expect a strategic bounce upwards, which may have already started. In the end, the channel 1.0520 – 1.2000 may well turn out to be a multiyear sideways movement zone where the SNB is trying to keep the CHF.

Gaspar Markosyan