Euro Remains Range-Bound vs. Swiss Franc - SNB Intervention Risk Looms

The Swiss franc initially fell against the majors after the Swiss State Secretariat for Economic Affairs said that the nation's unemployment rate jumped to a four-year high of 3.8 percent (seasonally adjusted) in June, from 3.5 percent.

The data suggests that the recessions plaguing the economies of the Euro-zone, Switzerland's biggest trade partner, is hurting Swiss businesses, and rising layoffs will ultimately impact domestic demand as well. Meanwhile, the euro was also a laggard for the most part, as the annual rate of Euro-zone GDP growth for Q1 was revised down to record low of -4.9 percent from -4.8 percent as investment fell 4.1 percent and exports plummeted 8.8 percent. However, timelier signs of export demand have shown slight signs of improvement as the German Economic Ministry said that industrial output surged 3.7 percent in May, the biggest monthly increase in 16 years, while the annual rate rose from its record low of -22.3 percent up to -17.9 percent. That said, more than one month's worth of data will be needed before we can say that European trade has improved.

All told, EUR/CHF remains within an intraday falling channel formation, with support now at 1.5125 and resistance at 1.5200. This pair is important to watch as the Swiss National Bank (SNB) has cited the appreciation of the Swiss franc against the euro as a risk for deflation, and has physically intervened in the currency markets within the past two weeks. Also, last Thursday, SNB directorate member Thomas Jordan said that they “continue to consider interventions to prevent an excessive rise in the Swiss franc.” As a result, traders should beware that the further EUR/CHF falls, the greater the potential for intervention grows.

Related Articles: Swiss Franc Weekly Trading Forecast, Euro Weekly Trading Forecast

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