The US elections are getting closer and the “fear factor” has a prominent role. The team at Nordea has a trade on the Swiss franc:
Here is their view, courtesy of eFXnews:
EUR/CHF failed to break above 1.10 in October. While in October EUR/CHF was driven down by the lower EUR/USD currency cross, November started with the panic surrounding the US election, which increased demand for the CHF as the safest among the European currencies. The fall in USD/CHF preceded the drop of EUR/CHF below 1.08 in the first days of November.
If our baseline scenario for the US election materialises, this is a great opportunity to position for an EUR/CHF return to above 1.10…That’s our forecast, against the worst-case scenario of 1.0650.
In case of a Trump win, expect further pressure on the CHF. However, in a worst-case scenario we should see the CHF underperform the JPY. While both the CHF and JPY are safe havens if US rates drop, the JPY should strengthen more. The CHF is still more than 15% overvalued against a basket of currencies, while the JPY is still slightly undervalued, especially against the USD (5-8%) by long-term models.
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