In last 2 months was forex market very volatile, big equity moved to safe heaven currencies – CHF (mainly), JPY and another big 1 000 pips move in EUR/USD mainly thanks to Greece debt.
EUR/CHF fall to level 1.00634, which is all time low for this pair, after that we saw rebound to 1.1980 and another sellof to levels 1.10, where SNB (Switzerland National Bank) start another intervention to help Switzerland export business. SNB want to keep EUR/CHF at least at 1.2000 level and is ready to buy unlimited ammount of EUR. Can this work? What will happend?
Can this work?
I think that in medium term exactly yes, because SNB has huge reserves to buy very big ammounts of EUR, but for longer term is not easy to answer, you know, Switzerland is small country and world is big. Last year they tryied to make an intervention and they fail, they lost allmost 40 billions dollars, but i think that now it can work, because once they say to public, that they will hold the 1.2000 line, lot of traders will start to play the game with them, because it is possible to make very big money with low risk.
What will happend?
I think that is very important to make an analysis of this market situation in two views, first one is medium term (several weeks) and second one is long term (6 – 24 months).
In medium term i think that level 1.2000 will be very very very strong support, because lot of leverage traders will like to play the SNB strategy, with tight stops. Key levels to watch for these traders are levels around 1.2000, 1.2020 and 1.2050 to buy and levels for TP are 1.2100 and 1.2185. For longterm traders are key levels for buying 1.2000, 1.2050 and for take profit levels 1.2185 and 1.2350.
For longterm traders exist three main risks: situation in EUROzone + situation in China and USA + safe heaven return for CHF. Big players like funds and banks can start to sell into the strength to try break key level for SNB, but this strategy will take some time.
How to make money in medium term?
I would advice to buy EUR/CHF at levels 1.2000, 1.2030 and 1.2050 with SL 1.1975, which was resistance (1.1980) at previous rebound from levels 1.00634. I think that the SNB choose their key level very good, because in technical view is 1.1980 very strong support, 1.2000 is very important psychical level (do you remember how many times was tested USD/CHF level 0.8000?). If the SNB would be strength, i think that should't let the market fall under 1.1990 – 1.980, because they will be very big stops from leverage traders and would be much more expensive to buy another ammount once the market would fall down. Take profit i would set up at level 1.2160 in case you think will be rally for some time between levels 1.2000 – 1.2180 or in case break level 1.2185 i would set up take profit to level 1.2320.
For me for medium term trading is situation at market clear, im long at EUR/CHF. For longterm trading is not such clear as it seems to be, there are several risks like Greece default, high debt of Italy, Spanish and Portugal + world unstable situation like big banks shares falling thanks to big ammounts in bad investments + possibility of safe heaven CHF return. For longterm traders i would advice try medium term strategy with option hold the position for longertime, depends on current market situation.
- 1.1980 strong support
- 1.2000 psychical level, strong support
- 1.2000 key level for SNB
- from traders sentiment – 75% are bulls, 25% are bears (medium term)
- Greece default (for longterm traders)
- world is still unstable (for longterm traders)