The technical picture for the pair was already supportive of a downside push with the double-top pattern forming at around 1.0500. But when you throw in a surprise policy pivot by the SNB, it really makes for a strong argument for the pair to make a move towards parity again.
The swissie side of the equation is rather straightforward. The change in stance by the SNB has caught out markets and that calls for a repricing of what is to come in the months ahead. And when you throw in the fact that even the most dovish of central banks are moving, it really is a big jolt to equities and risk trades in general. I outlined last month that:
"If inflation pressures continue to escalate globally, the SNB and BOJ may not be able to escape this situation.
"Both central banks are fundamentally as dovish as one can think of when it comes to policy settings. However, if even they see a need to shift, there's going to be hell to pay in markets.
"With the franc and yen typically safe haven assets, a shift in policy thinking is enough to spur a massive inflow into the respective currencies - especially at a time where markets are having to deal with recession risks, deleveraging, and inflation uncertainty.
"That will be a self-reinforcing move where we will likely see risky assets be sold off even more heavily and I would expect such flows into the franc and yen to be rather sizable and significant."
Meanwhile, if you look at the euro, it is tough to figure out the positives unless the ECB manages to sort out its feet on fragmentation risks. Money markets have priced in significantly bets on the central bank hiking rates through the year and the downside risk is that those rate hikes may not materialise - not least with recession risks looming.
At this stage, if equities continue to crater, a push to parity beckons for EUR/CHF and that may just be the beginning of a steeper decline.
