From the FXWW Chatroom: Bottom Line: In our latest Liquid Insight our FX Strategist notes that lower CHF remains a high conviction call, but Italian political situation could pressure CHF shorts in the near-term. We argue that recent CHF price action will further embolden the SNB to maintain verbal pressure on CHF which in turn supports our medium-term bearish view on CHF. Having been short CHF versus both USD and GBP we have been advocating short CHF/JPY since the start of the year through a time when that cross has fallen by 8%. We think CHF losses are likely to continue but are cognisant that renewed Italian political concerns will pressure the large CHF short position that has been building. EUR/CHF is currently a play on spread widening as flagged by the below chart which shows the correlation between EUR/CHF and Italy/Germany yield spreads.
We also look at the technical backdrop to CHF/JPY which suggests further downside but our bias is to sell any rallies.
Spot Trader View: I think longer term the CHF will trade lower but in short term we have more room for CHF to trade higher even with EURCHF coming a long way over last few sessions, next support in EURCHF being the 100d at 1.17382. Obviously on the way back up longer term, 1.200 proving a tough nut to crack so expect sticky trading up there.
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