EURCHF neutral

EURCHF is approaching parity again

29 june 2022 49
Volkov_Anton
Volkov_Anton

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For the second time this year, the EURCHF pair is in close proximity to the parity level of 1. The March attempt to go below this iconic mark was unsuccessful. Will the current attack on the EURCHF parity level be more successful?

 

The franc continues to be in demand after the National Bank of Switzerland sharply raised its key rate by 0.5% on June 16, which was a big surprise for many market participants. The fact that even after such a serious step the level of the key rate in Switzerland remains at a negative level (-0.25%) does not bother traders who continue to rely on the growth of the franc.

 

Of course, the general risk aversion in world markets plays in favor of the Swiss currency. The franc is one of the main defensive currencies, along with the US dollar and the Japanese yen. However, the Bank of Japan continues to ignore the general tightening of monetary policy, which clearly does not benefit the yen.

 

As for the American currency, its quotes already include an increase in the Fed's key rate above 3%. The possibility of an even more serious rate growth is very doubtful - a recession in the economy is becoming more and more likely, to combat which the Fed's tightening policy will have to be stopped. As for the Swiss regulator, given its current negative value, the potential for a rate hike is much greater.

 

The euro still does not look stable, despite the promises of the ECB to finally start raising rates starting from the next meeting on July 21. An old problem is that the growth of European bond yields is too uneven, threatening a new debt crisis similar to that of 2011 and 2012. The mechanism for smoothing the difference in bond yields has not yet been officially presented, but in any case it will limit yields and reduce the attractiveness of euro assets.

 

And yet, it is quite possible to count on some rise in EURCHF. Given the clear signs of oversold RSI, as well as the high psychological significance of the parity level, a sharp breakdown of the 1 mark looks unlikely. On the contrary, at the parity level, there are probably many orders to buy EURCHF with the expectation of a short-term upward rebound.

 

Nevertheless, in the medium term it is not recommended to make too serious bets on the growth of the euro - fundamentally, the European currency remains weak, which is confirmed by the main macroeconomic indicators.

 


Following trading strategy can be offered:

 

Buy EURCHF when falling to level 1. Take profit 1 - 1.012. Take profit 2 - 1.02. Stop loss - 0.997.

 

Also, traders, at their discretion, can use Trailing stop instead of a fixed Stop loss.

Volkov_Anton
Volkov_Anton

Listed among the best MarketCheese authors
1st in the segment "Currencies"
2nd in the segments "Indices" and "Metals"
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