We all know how people change their minds very easily. It appears that governments are not any different. For the better part of last year we heard complaints from some countries that their currencies were too strong. That was slowing down economic recovery, putting them at competitive disadvantage, blah, blah, blah. Some were threatening interventions, while others, namely Switzerland, actually did it, numerous times. Nobody wanted to have strong currency.
All of a sudden everything is changing, and financial authorities don’t seem to care any more about foreign exchange levels. Out of the blue, Canadian authorities are “comfortable” with Loonie approaching parity with USD. Today Swiss National Bank also reversed its stance on the Franc, or so it seems. Statement from a board member, Jean-Pierre Danthine, advises individuals and business to get ready for interest and exchange rates to be set “freely by the markets”. This implies that SNB decided to stop intervening. Perhaps it became too expensive, considering that results were not very impressive?
Result was immediate jump in CHF, especially against the Euro, but in other pairs as well. Too bad for my trade in GBP-CHF, which almost reached the objective, but rolled over and fell like a rock. It currently is right about where it started. I’m staying in for now and see what happens tomorrow.
For Friday I’m looking at shorter term trades in Yen pairs. On this EUR-JPY 1H chart price made new low. It will be interesting to see if 123.75, last minor high, is reached. That could be a good level to sell, with tight stops and maybe even reverse. Last low of 122.60 is also a sell. All targets would be small, form 60 to 100 pips depending on which pair. With the exception of EUR-JPY, most Yen crosses have tighter daily ranges recently. This suggests a chance or above average move fairly soon. Which way? I’m leaning towards moves down, but will use much smaller stops then normally and not hesitate to reverse if price turns around.
Mike K.
Interesting view on central banks- They don’t care any more. Too difficult to fight? I read somewhere that interventions don’t work anyways. You also expressed similar views.
Well, I think they mainly try to buy time, the central banks, slowing down the currency movement, until, eventually, markets reverse over time. It is very expensive and can take long time. The Swiss spent what, half a year or more pushing Franc down, with not much luck. Maybe now they figure that by letting it do whatever it will find the extreme sooner.
Thanks. So if they leave it alone, chf can move faster to some top (bottom on the charts) and finally turn around? Could be a possibility.
Who knows what they are really thinking. I personally think that at some point it becomes too expensive, especially if there are no desired effects.
[...] said that individuals and business should get ready for interest and exchange rates to be set “freely by the markets”. For most people this meant no more intervention because Swiss authorities were comfortable with [...]