In the forex market, huge volume makes even big interventions very hard. The SNB’s intervention had a short lived effect last time, and this time is no different – the correction will come. Such cases are great trade opportunities.
The Swiss National Bank intervened in the forex market on March 12th in order to weaken the Swiss Franc. A weaker currency makes Switzerland’s export driven economy stronger. At first it worked: the Swissy plunged against the US dollar and against the Euro quite fast. Technical barriers were breached.
But this effect was short lived. A few days later, the Swissy became strong again. The market corrected itself. In a $4.5 trillion daily market, such interventions, even from very strong and influential institutions as the SNB, can’t last for a long time. This is one of the basic characteristics of the forex market. Influence and foul play – not in forex. The high volume in forex makes it impossible.
On Wednesday, June 24th at about 10:40 AM GMT, the SNB did it again. They intervened in the forex market, and sent USD/CHF from 1.0630 to 1.0980 at 11:40 GMT. Yes, it leaped 350 pips in one hour.
Since then, the pair strengthened a little and then weakened. At the time of writing, USD/CHF trades at 1.0940. Still high, and there’s enough room to go down.
I’m not saying it’ll dive back to 1.0630, but it sure does have lots of room to fall. A great trade opportunity indeed.
Such interventions will happen in the future. Remember that they are short lived, and that a correction is imminent.
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