© Marc Spaelti
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Officially the central bank will keep the 1.20 peg for the time being, which could be in fact a 2-year time span. The Swiss National Bank will be very hesitant to remove it too quickly mostly due to psychological reasons. I mean, while everybody knows that the central bank is buying the Euro at 1.20 francs, it effectively stops speculating by going long Swiss Franc. They have been able to do this, and now with the recent rise of the Euro, EUR/CHF has gone temporarily as high as 1.25, and that is about 2% away from the peg at 1.20. However, the level is not that far away so that the central bankers could agree to remove the peg as it is not needed anymore. I would expect that as soon as they would make such an announcement, market participants will immediately try to buy the Swiss Franc and sell the Euro. That is why I said the policy makers have to be very careful not to remove the Euro floor too early. They need the market to remain relatively far away from the peg, and it would be better if it was between 1.25 and 1.30 and even stabilize close to 1.30. I think in that event they could admit that the peg is not needed. On the contrary, I also do not think that policy makers will increase the 1.20 peg to 1.25 or even to 1.30, as some experts constantly insist that the central bank should do so.
What is your forecast for USD/CHF?
In the short term 0.88 is a major support level for USD/CHF, while today we are at 0.91. Similarly to EUR/USD, where I say that we could have another try at 1.40, this would mean a fall in USD/CHF to about 0.88. Nevertheless, I would like to get long USD/CHF positions at 88 and I think that we could see 1.00, hence there could be a very nice movement from 0.88 to 1.00.