FxWirePro: Trades for bullish Swiss franc – Sold NZDCHF and hold EURCHF


Swiss franc (CHF) has been the top performing DM FX pair over the last couple of months, the only currency to have gained indeed against USD. 

We uphold bullish stances albeit rotation from GBPCHF into NZDCHF simultaneously holding a shorts in EURCHF. CHF boasts the largest current account surplus of the funding currencies (more than twice as large as Japan's) and has cross-border bank claims denominated in CHF which as a percent of GDP are as large as those in USD and twice as large as loans denominated in JPY (70% vs 35% of GDP).

Moreover, CHF is no longer expensive in real terms (CHF REER is below its 30Y average) while its economy has accelerated and is growing twice as fast as the Euro area. Regular readers will know that we doubt whether the SNB has much capacity left to continue intervening to cap CHF as its balance sheet is already at 125% of GDP. To that it may be added that the SNB now has less economic justification to intervene. 

Either way, the evidence from the weekly sight deposit data is that the SNB has been essentially inactive despite the slide in EURCHF from 1.20 at the end of April. The absence of the SNB is an encouraging development for CHF bulls. 

Trade recommendations: 

Sell NZDCHF at 0.6341, stop at 0.6468.

Sold EURCHF at 1.1350 August 10th. Marked at +1.33%. Courtesy: JPM

FxWirePro’s Currency Strength Index: Hourly NZD spot index is flashing -69 (which is bearish), while hourly EUR spot index was at shy above -12 (neutral) and CHF at -50 (bearish) at 12:13 GMT. 

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex