Published on World Currency Watch.com, by Sean Hyman January 22, 2010.
Ever since October 2008, the EUR/CHF currency cross has been front and center on the Swiss central bank’s trading screens.
It’s because that one exchange rate (the euro vs. the Swiss franc) can make or break Switzerland’s export industry.
Let me explain. Most of Switzerland’s exports go to the remainder of Europe. So if the euro gets too weak, then the Swiss goods appear to be too expensive. Once the import prices hit a certain point, Europeans just quit buying Swiss goods … //
… (watch two charts and text) …
… The pair recently formed a triangular bottom and broke out above the formation. Right now it’s holding above that downtrend line but is sinking right along with the line. See if the pair can hold above the trend line and above the previous 1.47 bottom or not.
It’s my opinion that the central bank is reloading their gun right now and could fire again shortly.
Their export sector is just too vital to their economy to allow the exchange rate to continue to fall much further without responding.
It’s only a matter of time.
Have a nice weekend, Sean Hyman, aka Professor FX. (full text).