EUR/CHF Moving Higher – Implications for EUR/USD and USD/CHF

4

The SNB put a floor under EUR/CHF, at 1.20. In the first hours after the shock the pair was just above this line, as the authorities struggled to stabilize their huge effort.

It has now drifted higher, taking a safer distance. What does this mean for USD/CHF and for EUR/USD?

USD/CHF

This upwards move has pushed Dollar/Swiss higher as well. The pair is pushing above the 0.8626 line which was an all time low before the recent plunge. It previously traded between 0.8550 to 0.8626, and now it is in a higher range.

The next serious resistance line is at 0.8780, so there’s a long way to go. The SNB isn’t officially interested in USD/CHF, but cares more about the exchange rate with the euro, so the 0.8626 won’t necessarily provide strong support line 1.20 in EUR/CHF.

EUR/USD

There has been criticism about the SNB, about the correlation with the euro, especially in the current debt crisis. As Switzerland trades heavily with the euro-zone, it seems that they had little choice.

The move of EUR/CHF higher, currently around 1.2150, provides some breathing space for the Swiss authorities. This gap, of currently 150 pips, will allow them to absorb some fall of the euro against the euro and a fresh run to the “safe haven” Swiss franc.

So, this means more vulnerability for EUR/USD. The popular pair is currently between the 1.4030 and 1.41 lines. The initial reaction to the huge Swiss intervention was a jump of EUR/USD. But this faded away quickly, and the intervention in EUR/CHF morphed into a stronger USD/CHF.

So, in case that Europe is hit with more bad news on the debt crisis front, or with softer policy from the ECB, EUR/CHF has room to fall, and so does EUR/USD.

For more about EUR/USD, see the euro to dollar forecast.

Get the 5 most predictable currency pairs

About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

4 Comments

  1. Bonnie Smith on

    A helpful viewpoint and ideas I’ll use on my blog. You have obviously spent a lot of time on this. Great job!

  2. Pingback: The Dust from Trichet’s Event Settled, But EUR/USD Dives Deeper in the Mud | Forex Crunch

  3. Pingback: USD/CHF Outlook – September 12-16 | Forex Crunch

  4. Pingback: EUR/USD Sep. 13 – Sliding Lower As Chinese Hope Fades | Forex Crunch