EUR/CHF falls below 1.1000

SNB phones are ringing

EUR/CHF is below 1.1000 for the first time in two years. 

The questions is: what can the Swiss national bank tolerate? It looked like a bid was holding the pair above 1.10 yesterday but that was probably an option defense or technical support.

It's given way in the past two hours and it's been entirely orderly so it's safe to say this isn't the line in the sand that Jordan wants to draw.

I don't see a huge risk in intervention. I don't get the sense that specs are piling into shorts and the move has been relatively orderly. There's also the fundamentals underpinning of the ECB looking to cut rates and buy more bonds, so there's some justification.

If you ignore the risk intervention, or believe it's not coming, then the technical picture is undoubtedly negative, with no real support now until the 2016/2017 lows. 

EURCHF weekly

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EUR/CHF near 1.10 means that the SNB is likely to take action sooner rather than later

Traders should be on alert in case the SNB pulls off any surprises again

EUR/CHF D1 23-07

After the incident on January 2015, you can never say never in markets and there's always an inkling of doubt when it comes to SNB policy decisions now. It goes to show how much credibility can be hurt just off of one unconventional decision.

With EUR/CHF lurking around the 1.1000 handle now, it is leaving traders in a bit of a pickle with regards to their next trade in the pair.

On the one hand, the franc is gaining on the back of haven flows as the global economy continues to show signs of weakening. On the other, potential SNB intervention and action could just help to push up the pair from current levels as the central bank tries to smooth out the appreciation in the franc.

In my view, with major central banks starting to ease further and potentially see their currencies weaken further, the SNB will eventually choose to act sooner rather than later and the 1.1000 level is arguably a key threshold for them to decide on that.

Among potential options for the central bank is to cut policy rates further into negative territory or perhaps pursue interest rate tiering. But the easier option - and one they haven't been shy about - for the central bank is to intervene to push down the swissie directly.

The SNB next meets on 19 September but with other major central banks set to communicate their policies well before that and potentially push their respective currencies lower, it does put the Swiss central bank in a bit of a pickle.

Will they just intervene to smooth out the franc appreciation in the mean time before officially communicating more stimulus measures? Or will they pull off another unorthodox surprise again by announcing changes before the policy meeting itself?

Either way, it's best markets be prepared because as long as the franc threatens to strengthen further, it's a question of when and not if the SNB will step in.

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EUR/CHF threatens break of 1.1000 for the first time since 2017

EUR/CHF presses to the downside

Money continues to flow into the Swiss franc on speculation about the world entering another global easing cycle.

The SNB has battled to get EUR/CHF higher for years but they're about to have another fight on their hands.

Weekly chart:

EUR/CHF presses to the downside

Watch out for any signs of buying if the pair breaks 1.1000. It was originally a drop through 1.1000 in 2011 that prompted the SNB to put in the 1.2000 floor.

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USD/JPY upside limited by key near-term resistance levels, what to look out for?

USD/JPY gains limited by the 200-hour moving average and the 108.00 level

USD/JPY H1 22-07

The pair is holding higher on the day after the yen weakened into the Tokyo fix earlier on but the move up in USD/JPY remains limited by the 200-hour MA (blue line) for now. That is preventing buyers from seizing near-term control of the pair.

Of note, there are also offers resting around the 108.00 handle keeping price action in-check with large expiries around $3.4 billion set to roll off on Wednesday likely to play a role in putting a cap on things over the next few sessions.

Beyond that, further resistance is only seen around 108.30-40 before further offers lie at 108.50 set to limit gains in the event price breaks higher.

But for now, with markets still in a tentative state awaiting for key central bank decisions, we may not see a whole lot of chasing and directional trading. The yen will be more affected by trade headlines but if anything else, just watch out for yields.

Treasury yields are closer to flat levels on the longer-end today but 2-year yields are up by 1.3 bps to 1.831%. That will be the spot to watch to determine any further movement in the yen as markets start honing their focus on the ECB and Fed decisions.

In the bigger picture with major central banks opting to ease policy further, I still reckon the yen has scope to gain considering why we're seeing central banks around the globe choosing to do so. As such, the global slowdown will feed into worries surrounding the global economy and that's a key reason that the yen (and gold) can bank on as bond yields become more depressed in the US and Europe.

The key spot to watch in that respect for USD/JPY is the June low of 106.78. If price starts chasing a move to the downside beyond that, it could be a slippery slope for the pair back towards the January flash crash lows.

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G7 draft summary: Global growth appears to be stabilising with expected moderate pickup in 2020

Reuters reports on the G7 draft summary as global finance ministers and central bankers are still meeting in Paris

  • But risks remain tilted to the downside

  • Most importantly, trade and geopolitical tensions have intensified

It's similar to what major central bank communication has been recently i.e. expecting a recovery to still come through (but being pushed back from 2H 2019 to 2020 now) while viewing that risks to the global economy are skewed towards the downside.

The thing that stands out more for me is that they're viewing Facebook's Libra as raising "serious regulatory and systemic concerns", which they argue should be addressed before such a project can be implemented.

It's similar to remarks by finance ministers yesterday over the matter but this continues to pour cold water on Libra and cryptocurrencies in general in the past few days.

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Ireland's Varadkar: I can see a route to a resolution on border issue

Comments by Irish prime minister, Leo Varadkar

  • There are a few ways to avoid a hard border

  • If there are proposals that genuinely finds a solution, will listen to them

  • But if there are no meaningful suggestions, we cannot move away from backstop

  • If there is a no-deal Brexit outcome, it will be the choice of the UK government

Much like Barnier earlier in the day, he sounds more positive and they're offering some willingness to negotiate (to some degree) at least. However, unless the UK can come up with a never-before seen or heard solution, there's no running away from the backstop and the current withdrawal agreement.

Cable is still holding firmer at 1.2480 currently as price is hovering just under key near-term resistance levels for the time being.

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NZD/USD inches higher but upside still limited by key daily resistance levels

NZD/USD moves to a session high of 0.6720

NZD/USD D1 17-07

The kiwi is a little bid on the day with NZD/USD pushing higher on the session but it's the same old story as it has been sine the start of the week. Price is once again flirting with a break above the 200-day MA (blue line) @ 0.6719 as buyers are looking to try and establish further upside momentum above current levels.

Key daily resistance from the swing highs around 0.6720-30 is also proving to be a tough spot to hold a break above and that is helping to limit gains seen so far this week.

As such, keep an eye on the above levels again in trading today as they will dictate sentiment in the pair and determine sellers' conviction to stay "in the game".

Looking ahead, be wary of tomorrow's Australian jobs report as it could further influence AUD/NZD as the pair continues to inch towards the June low of 1.0427 (currently 1.0437). A break below that could precipitate further gains in the kiwi on AUD/NZD cross-selling and allow NZD/USD to potentially search for a break higher in the short-term.

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EUR/GBP continues march higher but runs closer to key resistance points

How much higher can EUR/GBP go?

EUR/GBP D1 17-07

The pair has been on a solid run since bottoming out around 0.8500 at the start of May and the pace of gains seen has been unrelenting. If things stay as they are, this week will see the euro post an unprecedented eleven successive weeks of gains against the pound.

The pair is now posting fresh six-month highs at 0.9051 but is moving closer towards the swing highs posted back in December and January around 0.9055-88. Beyond that, further resistance is seen near the 0.9100 handle with the January high seen at 0.9108.

I reckon this region will be a key test for EUR/GBP in the coming week. If price stalls out around these levels, this may just be as good as it gets for the current win streak. But if buyers are able to extend the momentum above the levels pointed out, the next key resistance level is only seen at the August 2017 high of 0.9306.

That means there is plenty of breathing room to extend to the upside still but only if buyers can navigate through the resistance levels above.

Once again, it must be reiterated that the gains seen in the pair here is largely ascribed to pound weakness so be aware of stretched positioning and potential short covering in the currency if traders see fit.

Short pound positions were already seen at their most stretched since September 2018, based on CFTC data last week. And after the recent moves, I reckon that has probably stretched further and is something to consider when gauging further weakness to come.


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Commerzbank still sees scope for upside bias in EUR/USD

This comes despite the pair slipping back towards 1.1200 in overnight trading

EUR/USD D1 17-07

The firm's technical analyst, Karen Jones, argues that attention has now switched back towards the March and mid-June lows around 1.1176-81 and as these levels hold the pair from falling further, an upside bias will prevail.

Adding that they see a recovery back towards the 200-day MA (blue line) and early June high of 1.1320-50. Should price work its way back towards there and above the June high of 1.1412, they see a further upside move towards a test of the 2019 high @ 1.1570.

The firm says that they view the April and May lows near the 1.1100 handle as a "turning point" and targets a move towards 1.1990 in the longer-term.

I wouldn't say that there's anything wrong with the technical picture/argument they're pointing out here but in my view, this has to be backed up by fundamentals down the road.

As such, the Fed and ECB will be major factors affecting the currency pair over the next two weeks and we'll only get a better idea on the outlook after i.e. how will yields perform and how dovish each respective central bank will be in the coming months.

Not to forget, there's also the threat of trade tensions between US and China escalating and I don't see how that will help the euro area economy and such sentiment will no doubt also weigh on the euro in the bigger picture.

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EUR/USD extends fall as the euro slips a little further on the day

EUR/USD falls to a low of 1.1231 on the day

EUR/USD H1 16-07

The dollar is holding steady on the session but the euro isn't faring well as it falls against the likes of the greenback, yen and swissie with German yields pressured after the poor ZEW survey report earlier.

For EUR/USD, price is now falling below minor support @ 1.1238 and is looking towards further support around 1.1216 and bids at 1.1200 next. This comes as sellers regain near-term control after breaking below the 200-hour MA (blue line) @ 1.1248.

In light of the focus being on the dollar and Fed chair Powell's dovish remarks last week, EUR/USD has barely put up a fight to break to the upside. Now that sellers are looking to take over instead, this could spell trouble for buyers down the road.

The key risk event coming up will be US retail sales data later. Let's see if there's anything in that to change the current sentiment.

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