Faith in the SNB: Buying EUR/CHF at Market – Trade Closed

Trade Closed: 2012-09-10 22:45

EUR/CHF 4-hour Chart

I guess the SNB really was determined to defend the 1.2000 mark at all costs! Despite all the weakness surrounding the euro in recent weeks, EUR/CHF remained above the 1.2000 mark, not once dipping below the SNB’s peg.

I’ll admit, there were times where I was starting to hope on this pair, as it traded within a tight range of less than 10 pips for the better part of THREE MONTHS. Still, I kept telling myself that all we needed was a bit of jawboning from the SNB or a change in the peg so that my patience would be rewarded.

And that’s exactly what we got!

Late last week, amid the positive reaction of the ECB’s launch of the OMT program, we also heard rumors that the SNB would be raising the peg from 1.2000 to 1.2200! This combination of news helped the pair soar above the 1.2100 mark! Boomshakalaka!

Profit target hit at 1.2100: +84pips / +1.00%

All in all, this left me with a reward-to-risk ratio of about 1.82:1, which ain’t that bad at all. I’m happy I stuck to my trading plan, as there was no indication that the SNB would back off its pledge to hold the peg.

Overall, a pretty good week for me, as I also grabbed some nice pips on my EUR/JPY trade.

Congratulations to everyone who had the patience to hold on to this trade for the past 3 months! Give yourselves a pat on the back – it’s well-deserved!

Trade Update: 2012-05-25 00:30

EUR/CHF 4-hour Chart

How funny is it that the chart above looks just like the heart rate monitor of a man who just came back to life after flatlining?? That’s EUR/CHF for you!

For the longest time, it looked like this pair was dead as it was stuck in the tightest of ranges. See for yourself: for over a month, its daily movement was limited to within 10 pips!

But yesterday, it came back to life and spiked up to 1.2078 as rumors went around that Rabobank has been acting on behalf of the SNB and loading up on EUR/CHF longs recently. Some say that up to 50 billion EUR worth has been purchased in the past few days alone, but so far, neither the SNB nor Rabobank has confirmed these rumors.

Speaking of rumors, word on the street is that the central bank may also introduce a tax on deposits. Such a move would act in favor of our trade as it would dull the Swiss franc’s safe haven appeal. Oh yeah!

But whether or not this is true, I don’t think that this is the last we’ll hear of SNB intervention speculation. The SNB’s commitment to defending 1.2000 is being tested by the markets in light of the euro’s recent sell-off, and I think it’s only right that the central bank flex its muscles.

The surge in EUR/CHF that we’ve been waiting so long for may be just around the corner, my friends. Remember, patience is a virtue!

Trade Idea: 2012-04-11 02:19

EUR/CHF 4-hour Chart

Looks like the market is determined to put the Swiss National Bank’s (SNB) threats to the test, eh? Price is currently just 15 pips away from 1.2000!

Even though the central bank has gone on record many times to say that it will defend EUR/CHF at this major psychological handle, the market has been able to find its way down. As a matter of fact, it touched the 1.2000 handle late last week!

Since then, the pair has been hovering above the critical level. With risk aversion creeping back in the market’s psyche (Spanish and Italian bond markets made a mess of things yesterday), EUR/CHF has been able to stay in dangerous territory.

But I have a feeling it won’t be able stick around much longer. Why? Because I have full faith in the SNB’s ability to defend 1.2000! Heck, some guys say that we may even see a direct market intervention soon. Now’s as good a time as any for the SNB to step in, right?

Look at it this way: if the central bank allows the market to break through this “minimum acceptable exchange rate,” it will compromise its credibility, which is a major no-no for central banks.

I don’t think SNB interim Chairman Thomas Jordan will allow this to happen under his watch, so I’m putting my money on the SNB and I’m buying EUR/CHF at market:

Bought EUR/CHF at market (1.2016), stop loss at 1.1970, profit target at 1.2100.

I set my stop a good distance below the 1.2000 handle, in case the market gets testy. And I have my profit target temporarily set at 1.2100, which was an area of interest in the past.

What do you guys think of my trade? You think the SNB has what it takes to keep 1.2000 intact?

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25 comments

  1. VB

    Its an interesting situation going on. But arent you conserned about the SNB letting the stops below 1.2000 get taken out before they intervene, if they do. I mean with all the 30+ billions of long orders being toutetd around the level, if the SNB intervene its going to have to fill all the TP orders as price moves up. So they could then let price get pushed down, thats going to create a massive spike lower as everyone gets puked and then they’ll have a nice clean path of pushing price higher. What do you think about the likelyhood of a scenario like that?

    Reply
    • cyclopipcyclopip Post author

      You present a very good point there, VB. But I think the market’s own hesitance to cross 1.2000 may keep EUR/CHF from crawling lower. Fear of intervention can work as well as an intervention itself.

      But I do see your point. It really can go either way. Thanks for the great insight. Will keep it in mind!

      Reply
  2. Jean-Philippe B.A.

    If all yo guys are buying, so many other guys are selling at 1.2015… are they mad? or going against the crowd cleverly.

    Reply
  3. സലീം (Salim)

    Lolzzzzzzzzzzzz. I closed all positions at 1.2100…. It may come down to the floor soon. Then I reload it again… Yeah….. Patience is virtue and it paid me. :D

    Reply
  4. സലീം (Salim)

    I think your stop loss is tight on this pair. Before Intervention, they will hunt stops below the 1.2000 area. May be a hundred pip spike to down to take all stops. It’s Just my opinion. Any way good luck.

    Reply
    • cyclopipcyclopip Post author

      A valid point there, Salim. It’s really hard to anticipate what will happen should price breach the 1.2000 mark. Thanks for the insight!

      Reply
  5. Jedster

    Here is a link to the full statement form Thomas Jordan about the recent break of the 1.20 peg.
    link to snb.ch
    He explains in simple terms how they are defending the peg. It seems highly likely that the peg will not be broken while the SNB have this policy is in place, so the only real way is up…

    Reply
    • cyclopipcyclopip Post author

      A very comforting read! I hope the SNB sticks to its guns. Patience will be key! Thanks for sharing this, Jedster!

      Reply
  6. സലീം (Salim)

    I am still on this. Yeah, patience is virtue. Are you think SNB will intervene soon?

    Reply
  7. YH

    Hi cyclopip..i also bought this pair 3 weeks ago at 1.2030 and it fluctuating in range for so long.. is it possible the long position still valid or I should just close it as Euro’s weakening?

    Reply
  8. Guest

    I think your TP might be a little low. I heard from a few sources they thought if the SNB makes a direct intervention they could peg the pair at 1.3000.

    Reply
    • cyclopipcyclopip Post author

      Yeah, rumors of a peg at 1.2500/1.3000 have been going around for months now. Now if only the SNB could confirm them! Haha

      Reply
  9. alwjmonster

    let’s bet the farm.. since i have no trade idea at the moment well i will just on with this.. 3lots. hope jesus could recover back my last week losses.

    Reply
    • cyclopipcyclopip Post author

      Careful with betting the farm there, man! Nothing’s certain in the world of forex.

      I’m only putting 0.75% of my account on this one. We should make it a habit to always practice smart risk management. Good luck to us, fellow monster!;)

      Reply
        • Velting

          thanks for this setup by the way.. made 3:1 yesterday : )… and am contemplating re-entering  

          Reply
      • Guest

        I have to agree with alwjmonster here. When a trade will almost certainly go one way, I see no problem with better a proportionately large amount of money on it. Since this is a risky strategy, I only trade every time I get an ‘almost certainly’ indicator, which is once a week.

        Reply
  10. podz

    think your stop maybe a little tight, would not be unheard of to see a spyke 50>100 pips under 1.2000 first.  think eur,chf is like walking on egg shells at the mo!

    Reply
  11. AlpinePips

    Hi. Thanks for this awesome site! I have a newbie question for you as I try to get a grip on the fundamentals aspects of Forex and the SNB’s moves to keep the Swissy from getting too strong compared to the Euro…. I understand from your great explanation why the market might react as you predict with the EUR/CHF (it seems to be starting to go that way). But I would also expect the same reasoning to carry over to the USD/CHF, but that seems to be going down while EUR/CHF is starting to climb. Why the difference? Thanks in advance for any thoughts on this.

    Reply
  12. Guest

    Wow, what a tip. I’ve bought EURCHF straight away. The stochastic oscillator on the weekly chart shows a big potential.

    Reply
  13. cyclopipcyclopip Post author

    EUR/CHF is testing resistance at 1.2075 for the third time since May. I believe the third time’s the charm! Finally gonna move my stop to BE. We’re now risk-free!

    Reply

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