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EURCHF Extends Reversal Lower Amid Political Developments, SNB Reverberations

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  • In just over two weeks, EURCHF has reversed almost three percent from the May highs of 0.9930. The latest EU political developments have been weighing on the single currency, while hawkish remarks from the Swiss National Bank continue to reverberate.
  • As a reminder, the currency was particularly sensitive to comments from SNB President Jordan, stating that the biggest risk of higher inflation stems from a weaker Swiss franc. Jordan also identified a “small” upward risk to the SNB’s inflation forecast, while noting that there are reasons to believe that the natural rate of interest has increased somewhat or might rise over the coming years.
  • Price action has seen EURCHF swiftly move back below both the 20- and 50-day EMA and the pair has also breached initial support at 0.9730, the May 3 low. April’s spike low at 0.9566 remains the notable level on the downside.
  • Positioning extremes are also likely contributing to the sharp reversal, having noted that the net short CHF position now sits at 46.3% of open interest - the largest short in G10, having overtaken the JPY in the past month. This could provide scope for a continuation lower for EURCHF ahead of the June 20 SNB decision.
  • On the other hand, JPMorgan previously noted that even if the SNB don’t cut, they still think there is a host of drivers (growth, net flows, rate spreads) that can weaken CHF over the medium term.

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  • In just over two weeks, EURCHF has reversed almost three percent from the May highs of 0.9930. The latest EU political developments have been weighing on the single currency, while hawkish remarks from the Swiss National Bank continue to reverberate.
  • As a reminder, the currency was particularly sensitive to comments from SNB President Jordan, stating that the biggest risk of higher inflation stems from a weaker Swiss franc. Jordan also identified a “small” upward risk to the SNB’s inflation forecast, while noting that there are reasons to believe that the natural rate of interest has increased somewhat or might rise over the coming years.
  • Price action has seen EURCHF swiftly move back below both the 20- and 50-day EMA and the pair has also breached initial support at 0.9730, the May 3 low. April’s spike low at 0.9566 remains the notable level on the downside.
  • Positioning extremes are also likely contributing to the sharp reversal, having noted that the net short CHF position now sits at 46.3% of open interest - the largest short in G10, having overtaken the JPY in the past month. This could provide scope for a continuation lower for EURCHF ahead of the June 20 SNB decision.
  • On the other hand, JPMorgan previously noted that even if the SNB don’t cut, they still think there is a host of drivers (growth, net flows, rate spreads) that can weaken CHF over the medium term.