For better part of this year I have been writing, among other things, about Swiss National Bank intervening in the currency markets. Among the many central banks that talked and threatened with intervention, SNB was the only one that actually delivered. They wanted Swiss Franc to depreciate, in order to stimulate domestic economy. And they did it repeatedly. All market participants had to learn to with this version of “sword of Damocles” hanging above them. Couple of times I happened to be in  trades with CHF during these events. They are fast, furious and can be very painful. Or rewarding if you are on the right side of the market at the correct time. That was my experience and I managed to make few pips, courtesy of SNB.

Recently voices have been raised about possibility that era of intervention might be over. Central banks do not publicly disclose details about these kind of actions, trying to keep speculators off balance, so no official statement has been issued by SNB. However, there are signs that Swiss authorities are at least slowing down selling of Franc. Document published on their official website, www.snb.chf shows a breakdown of foreign exchange reserves, by currency. Tables enclosed there shown large increase in reserves occurring during second quarter of 2009, at the height of intervention period. Data shows USD holding jumping from 13 billions to 19 billions and EUR from 20 billion to almost 32 billion. Huge differences, consistent with selling CHF and accumulating other currencies. The third quarter, however, shows much smaller increases, suggesting that SNB is at the very least slowing this activity, maybe even bringing it to a halt.

It is possible that Central Bank finds Swiss economy recovering in good order and no longer needing the boost of weak Franc. Inflation could also be of concern. We will find more in December, during bank’s next quarterly monetary policy assessment. If we don’t see any more direct interventions soon, I expect more and more speculation on the subject and  talk about strong CHF.

As it happens, AUD-CHF is showing weakness, pointing to possible reversal, at least on an intermediate time frame. This chart and what I wrote earlier about SNB are probably unrelated, mere coincidence, they just both happen to come up at the same time. Charts do not show a reason behind any move (news, rumors, facts) only document what happened. I think that if price of AUD-CHF heads lower, it will be more on a general pullback of Australian Dollar, which had a huge run this year. The way it looks right now, my intention is to sell this pair at 0.9238 with an objective of 0.9100.  Will update it as warranted.

Euro- Pound has been getting some coverage here lately coverage, with most recent mention in Central bank’s minutes. I wanted to see a bounce in this pair before selling it again. Well, we had it on Friday, strong, 200 pips run, which took this cross into a sell zone on daily chart. Now I have wait for a sell signal, in form of a strong bullish reversal pattern. Last candle was extremely bullish. In situations like this, it typically takes more than one day for market sentiment to turn. With this in  mind I think we will have to wait another 2-3 days (or longer) before viable sell opportunity emerges, if it happens at all, hopefully in the 0.9250-0.9300 area, looking for a move to 0.9000. Of course this is only an opinion and one possible scenario. Market can move in any number of ways, in complete disregard to my opinions. If anything, I’ll have to adjust to it.

Once something interesting develops, I will discuss it in more details, maybe even use 4H chart for analysis. In the meantime, plenty of other things could happen. As every Sunday, we could have gaps at the open, something to keep an eye on. Yen might get active, as it is often the case, and smaller time frames almost always present some opportunity. I expect to be busy even while waiting for the trades above to materialize.

Mike K.