EUR/CHF is looking to test a critical support level once again
I've mentioned many times that the SNB's comfort range for the swissie is EUR/CHF holding between 1.1200 to 1.1400 levels. Of course, the higher the pair moves (weaker swissie) then the better for the SNB. But with markets running with a risk-off mood, it has put the currency back in demand as haven flows dominate.
As such, EUR/CHF is beginning to slip back under the 1.1200 handle and nears a critical test of support levels around 1.1163-83. For those chasing further shorts, a word of caution as the SNB may be seen intervening to limit the pace of the franc's gains.
However, the more pressing issue for the SNB will be how does it battle against increasing demand for haven assets (the franc in this case) in the midst of rising global trade tensions and a worsening global economy?
There's no doubt that they have the means to combat such a move but realistically, they can only slow down the intensity of the rise in the franc rather than cause a counter-reaction. Nonetheless, the lower EUR/CHF moves from hereon, the more it increases the potential for the Swiss central bank to step into the market.
If we do breach support at 1.1163-83, further support is only seen towards the 1.1000 handle next and that could be an area where the SNB draws a hard line on things.
