Despite failing to extend gains beyond the 1.15 threshold, EUR/CHF was able to consolidate gains. The pair has been trading between 1.1259 and 1.1538 for the past four weeks. However, the single currency has completed its catch-up rally against the Swiss franc. Further gains are therefore unlikely, especially against the backdrop of mounting uncertainties ahead of the ECB’s September meeting and the current valuation of the EUR against its peers.
Since the beginning of the year, the single currency has risen more than 8.5% on a trade-weighted basis, while it has gained “only” 7.30% against the Helvetic currency, with the latter still making the most of its safe haven status. However the tide is slowing turning in favour of the CHF again as Draghi keeps investors in the dark. The resurgence of fears that Draghi under-delivers will most likely weigh on EUR/CHF over the next few days.
Looking at the SNB’s total sight deposits, one notices that is has remained quite stable through the summer with domestic deposits shrinking by roughly CHF 17.3bln, while total deposits edged up by CHF 3.7bln. This stabilisation allowed the SNB to spend a nice and quiet summer. However the summer is coming to an end.
EUR/CHF eased to 1.1374 on Monday morning, down 0.20% from 1.1407 at the opening. On the downside, a support lies at 1.1259 (low from August 18th), while on the upside a resistance can be found at 1.1538 (high from August 4th). We maintain our bearish view on the pair as we expect investors will soon return to safe haven ahead of next week’s ECB meeting.By Arnaud Masset