$EURCHF - Swiss National Bank Intervening

Hey all.

Something to note on EURCHF...

The Swiss National Bank want a weaker Swiss Franc.

To weaken the Franc,they conduct many different market operations.

One of course is to buy US equities and the other is to increase their holdings of foreign currencies.

Just last week, the Swiss National Bank increased their 'sigh deposits' of the dollar and euro by about 2.1bn CHF, the largest weekly increase in quite some time.

Naturally if you look at that chart you can see why.

It's a massive support level and a clear break would lead to a huge euro depreciation versus the Swiss Franc.

This would be adverse to the Bank's aims.

The problem is, however, that the US has placed the bank on the currency manipulator list and they might have their hands tied in terms of the extent to which they can devalue the Swiss Franc.

My thoughts, however, are that the euro is structurally too weak to sustain any real appreciation versus the franc.

We have many political problems now within the EU with regards to budgets, but also in France and Germany politically, and with the new Basel regulations potentially causing a credit crunch across European banks over the next few years due to higher capital requirements, the banking sector of the bloc looks weak too.

There is one saving grace perhaps, and that is if the euro funding trade unwinds, but I do not think that this will happen to any real extent yet.

I'd say that we range along this support for a while and then we start to see gradual dips lower as the Eurozone faces further deterioration in data.