“Don’t fight in the North or the South. Fight every battle everywhere, always, in your mind. Everyone is your enemy, everyone is your friend.” – Petyr Baelish, Game of Thrones
As many of us recall, the ending of HBO’s wildly popular Game of Thrones was panned for nonsensical plot points and dialogue, including Littlefinger’s bizarre comment above.
Apparently, a similar “chaos-is-a-ladder/ fight-every-battle-everywhere” philosophy pervades the US’s approach to currency manipulators as well. A day after the Trump Administration removed it’s “currency manipulator” label from China, it added Switzerland back onto its manipulation watchlist. As any student of European history will tell you, it’s difficult to pick a fight with the historically neutral Swiss.
In any event, the Swiss National Bank was quick to respond that it only intervenes into its currency for monetary policy purposes and not for export advantage. In the words of the Swiss International Finance Secretary, “It's to be stressed that Switzerland doesn't manipulate its currency in any way to achieve an adjustment in its balance of payments or an unjustified competitive advantage.”
Turning our attention to the EUR/CHF cross, rates fell sharply through the middle of last year before stabilizing in the 1.0815-1.1050 range through Q3 and Q4. In total, the bounce off 1.0815 support didn’t even hit the shallow 38.2% retracement of the summer’s drop, signaling that the momentum remained with the bears. With today’s headlines allaying fears of imminent intervention, we’ve seen EUR/CHF drop to its lowest level in nearly three years:
Source: TradingView, GAIN Capital
Moving forward, the technical bias on EUR/CHF remains bearish, with potential for an extension toward the late 2016/early 2017 support zone starting in the mid-1.0600s. Only a break out of the near-term bearish channel back above the key 1.0815 would shift the pair’s near-term technical bias back to neutral.