CHF monthly currency outlook (1 – 3 month)

Though EUR/CHF reached a new post-floor high in mid- September (1.1050), the pace of appreciation is painfully slow. But we do not expect that to change. Higher EUR/CHF is positioned in options with a risk reversal but the long tenor (1y at entry, expiring July 2016) shows how long this process is expected to take, says RBC Capital Markets. 

Technically there is a reasonably well-defined rising trendline for EUR/CHF, dating back to the start of the current move higher in July. Support comes in at 1.0880 - that also coincides with the 40dma. A break through there may set us up for a short-term retracement. 

"We would view that as a buying opportunity for EUR/CHF. On a 1-3m horizon, our target is still higher though we have adjusted our Q4 forecast (now 1.10, prev 1.12)", argues RBC Capital Markets. The latest quarterly SNB meeting did nothing to fundamentally change the outlook. The inflation forecast was revised lower again in the near-term (on lower energy prices) though the long-term forecast was little changed. 

Seasonally adjusted unemployment rose slightly in Q3 and the SNB calls the situation "challenging for many companies. In view of the lower margins, these  companies are under pressure to raise efficiency and reduce costs". The IMF notes that short-time work arrangements cushion the effect of slowing growth on unemployment. But the combination of previous CHF appreciation, lower commodity prices and slack in the economy all conspire to keep inflation soft and CHF slowly trending lower.