Will Swiss Central Bank give up EURCHF peg?

sambazone

Junior member
27 0
I am curious what you guys think about The Swiss National Bank SNB defending the eurchf peg.

SNB already accumulated over 400 Billion Eur defending the peg of 1.20

It has used about 50 Bill of that pile of EUR to buy notes of core european countries like Germany. It also bought treasury notes of USA,Britain, Australia, Canada.

The buying of notes pushed up GBP/AUD/CAD/USD relative to EUR.

The recent surge of EUR relative to USD from 1.21 to 1.31 has seen EUR/CHF barely budge. The past week eurchf has been heading back to 1.20.

Once, EUR starts to get under pressure relative to major currencies (it is happening already) I think we have all indication that SNB will renounce 1.20 peg and move lower to 1.15. After all, it can't keep expanding its balance sheet with EUR.

I would be curious to see 1.195 puts and 1.215 calls right now but CME does not seem to trade options on EUR/CHF futures.

http://www.cmegroup.com/trading/fx/...expMonth=201212


Trade idea: Sell EUR/CHF, buy USD/CHF; buy GBP/CHF all at the same time..
Any thoughts?
 

NVP

Legendary member
37,750 2,095
Sure......i'm sore I lost a nice trading partner on the CHF when it used to move smoothly with carry trades ....but thats life....

The SNB were petrified of increasing Currency strength threatening their nice clockwork world where everything works ......

Believe me I am a regular visitor to switzerland so I am happy they pegged it ....cost of living to visitors is bad enough already and would have gone to the moon if not pegged

so what next ?

Dont try to second guess them - they are smart cookies and will be watching all options....if Euro ever came north they would love to unload their trades but that doubtful although they will have been doing so on the odd burst recently

I Think they will just keep the peg until further notice and see what the Euro does....if it tanks they will have to invent more strategies but they need a decent peg on that trading partner for all their neighbours sake....

N
 

NVP

Legendary member
37,750 2,095
I am curious what you guys think about The Swiss National Bank SNB defending the eurchf peg.

Trade idea: Sell EUR/CHF, buy USD/CHF; buy GBP/CHF all at the same time..Any thoughts?


so ....Cancelling out the middle men you are then long on USD and GBP and shorting the Euro & CHF guys

Personally I'm not convinced as this is not addressing the EUR/CHF relationship you are talking about....you either take a punt on the EURCHF Correlation diverging/converging (buying trading breakouts & retraces) or not !

Going long on GBP and or the USD is to do with their own particular issues at the moment and I would never bother to use the CHF at the moment as it is the (poor)shadow of the euro which is the main issue !

read my thread - you will see where I am coming from on relative strengths and how I trade currencies

regards
N
 
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sambazone

Junior member
27 0
NVP, to say that switzerland is expensive is non argument from trader's point of view. I have been to norway last summer and it is a prohibitivly expensive country yet their currency strengthened even more recently, not least because swiss central bank has been buying norway treasury bills.
 

sambazone

Junior member
27 0
The idea behind selling EUR/CHF, and buing USD/CHF, GBP/CHF is that SNB has to move somewhere the Euros it has on its hands. The most liquid paper to move it to is US and GB.
 

Shakone

Senior member
2,458 665
Have a read of this thread

http://www.trade2win.com/boards/forex/134296-eploiting-eur-chf-1-2-minimum-exchange-rate.html

In which people were looking to exploit this, some wanting to go long with tight stop, but quite a few more looking to short just above 1.2. That was back in Sept 2011, and if they're still holding, they've received a fair drawdown and paying negative carry for all that time.

Personally, I wouldn't second guess what they will do. Currently the peg is in force, and I wouldn't short anywhere near 1.2 until there are signs that peg has gone. It will go when it is ready.
 

NVP

Legendary member
37,750 2,095
Have a read of this thread

http://www.trade2win.com/boards/forex/134296-eploiting-eur-chf-1-2-minimum-exchange-rate.html

In which people were looking to exploit this, some wanting to go long with tight stop, but quite a few more looking to short just above 1.2. That was back in Sept 2011, and if they're still holding, they've received a fair drawdown and paying negative carry for all that time.

Personally, I wouldn't second guess what they will do. Currently the peg is in force, and I wouldn't short anywhere near 1.2 until there are signs that peg has gone. It will go when it is ready.[/QUOTE]

precisely (y)
 

NVP

Legendary member
37,750 2,095
The idea behind selling EUR/CHF, and buing USD/CHF, GBP/CHF is that SNB has to move somewhere the Euros it has on its hands. The most liquid paper to move it to is US and GB.

sure..........but only when they have to and relative strength levels minimise losses......they are a shrewd bunch

N
 

NVP

Legendary member
37,750 2,095
NVP, to say that switzerland is expensive is non argument from trader's point of view. I have been to norway last summer and it is a prohibitivly expensive country yet their currency strengthened even more recently, not least because swiss central bank has been buying norway treasury bills.

heres the relative strengths of NOK , EUR and CHF in last 18 months

see that big correction last year ...jees the CHF was strong !

ok I see generally the NOK has kept above the other guys and is certainly showing strength.......and I see the NOK rising in July 2012 whilst CHF and EURO fell.....so perhaps evidence there of some cross buying....

generally though the rates are fairly tight compared to other currencies so I wouldnt be rushing to trade these pairs

N
 

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sambazone

Junior member
27 0
NVP, I would second guess how smart swiss central bankers are. After all they were selling gold at $300-$500 in between 2003 and 2008)).

Shakone, I am planning to start establishing position on EURCHF by selling calls and collecting the premium for now, so no negative carry. However, when EUR scare resumes and SNB publishes a quarterly report that shows big increase in EUR reserves, I will go short EURCHF... For now it is save to collect call premiums))
 

NVP

Legendary member
37,750 2,095
S - good luck with that ....and thanks for starting a decent thread ....
 

Shakone

Senior member
2,458 665
NVP, I would second guess how smart swiss central bankers are. After all they were selling gold at $300-$500 in between 2003 and 2008)).

Shakone, I am planning to start establishing position on EURCHF by selling calls and collecting the premium for now, so no negative carry. However, when EUR scare resumes and SNB publishes a quarterly report that shows big increase in EUR reserves, I will go short EURCHF... For now it is save to collect call premiums))

So what happens to the calls you've sold if they move the peg up to 1.25?
 

sambazone

Junior member
27 0
So what happens to the calls you've sold if they move the peg up to 1.25?

Move the peg to 1.25 with 450 Billion Euros on its hands? Sounds insane to me!

I am not saying it is 100% guaranted to make money. But the ods are very well in favor of the trade.

If EUR/CHF goes to 1.24, I will close the calls at a loss...
 

sambazone

Junior member
27 0
If you are not a pip scalper, but a directional trader, you are trying to think in terms of trades that have best risk/reward profile. All I am saying, is that this trade has excelent chances of winning.
 
 
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